By James Bryce
THE Spanish government has partly nationalised the country’s fourth-largest bank, which is struggling with €32 billion of loans linked to the troubled property market.
Under the deal, €4.5 billion in government loans to Bankia – which holds 10 per cent of the country’s deposits – will be turned into shares in the group’s parent company BFA.
The move means the state will effectively take full control of the bank, with a 45 per cent stake.
“It is a necessary first step to ensure solvency, the tranquility of the depositors and to dispel the doubts of the markets on the capital needs of the entity,” the finance ministry said.
The government is expected to provide up to €10 billion of financial aid to the lender, which has already closed 800 branches and laid off a quarter of its staff.
The bank’s chairman Rodrigo Rato resigned this week, just hours after Prime Minister Mariano Rajoy declared there would be a major shake-up of the banking sector.
“If it were necessary to get the credit to save the Spanish financial system I would not hold back from doing what other European Union countries have done – loan them public money – but it would only be as a last resort,” said Rajoy.
Talk of Bankia’s likely nationalisation drove the Madrid stock market to an eight-year low, while yields on 10-year bonds passed the significant six per cent mark.