Spain’s bankia needs additional billions

Spain's bankia needs additional billions

The fourth-largest bank must fill its reserves for bad real estate loans in this high, said economy minister luis de guindos on monday at a forum in madrid. In view of its lack of capital, bankia will be forced to apply again for state financial aid, according to the newspaper el pais.

Bankia had already received aid from the state bank rescue fund FROB in 2010 in the amount of a good 4.5 billion euros. De guindos nevertheless assured that bankia is a viable financial institution with a high level of liquidity. The bank is one of the four largest financial institutions in spain and was the result of a merger of seven savings banks. These had merged at the end of 2010 under the leadership of caja madrid to form the BFA (banco financiero y de ahorros).

Spanish financial institutions with bad real estate loans on their balance sheets have recently been increasingly at the center of the debt crisis. Due to the precarious situation of several banks, the confidence of investors in the spanish financial sector has dwindled more and more. With two reforms in just three months, the government has ordered financial institutions to set aside a total of 84 billion euros to cover both bad and non-problematic loans.

The ministry of economy announced on monday that the consulting firms roland berger (munich) and oliver wyman (u.S.A.) had received the order to audit the balance sheets of the spanish banks. This work should help "to increase transparency and definitely eliminate doubts about the valuation of the assets of banks in spain".

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