Spain’s government is to inject at least nine billion euros into Bankia, the country’s fourth largest lender, in the process taking control of it.
Economy Minister Luis de Guindos said they will provide all the funds the bank needs for recapitalisation.
Bankia needs the money to comply with government demands to cushion itself against property loan losses and to meet strict European Banking Authority rules on capital reserves.
The government has just picked Goldman Sachs to value Bankia and consultancies Oliver Wyman and Roland Berger were hired to audit other banks’ loan books, damaged by a property crash that helped push bad loans to their highest in 18 years.
The help for Bankia is part of an effort to clean up a banking sector laden with bad debts and stop the country sinking further into the eurozone debt crisis.