Spain said Monday it is urgently injecting 4.5 billion euros ($5.7 billion) into Bankia, a state-rescued lender still losing billions of euros. The state-backed Fund for Orderly Bank Restructuring (FROB) said its governing board had agreed to pump in the capital "with immediate effect" to restore its balance sheet.
Bankia lies at the heart of Spain's financial sector crisis, which led to eurozone members agreeing in June to extend a rescue loan to Madrid of up to 100 billion euros. The FROB said it would inject the money by subscribing to a capital increase by Bankia, stressing that the decision had been taken in agreement with the European authorities.
The money was just an avance on a broader capital injection to be made by the FROB into Bankia under the eurozone deal, it said. The size of the full injection would be decided in "coming weeks", it said. "By this measure, we restore the group's regulatory capital while the restructuring plan is completed and guarantee the security of deposits and the group's access to all possible sources of financing."
Created in 2010 from a merger of seven troubled regional savings banks, and then listed on the market in July 2011, Bankia's finances exposed serious weakness in the Spanish system. In the first half of this year it lost 4.45 billion euros, prompting the FROB to promise rapid action. A year ago, it was reporting first-half profits of 205 million euros. In May, the group was nationalised after saying it would need a total 23.5 billion euros to salvage its balance sheet, loaded with risky loans that had turned sour after the 2008 property crash.