Tuesday, May 8, 2012

Spain to spend billions on bank rescue

(Financial Times) -- Spain is planning a state bail-out of Bankia, the country's third biggest bank by assets, in a move likely to involve the injection of billions of euros of public money into the troubled lender.

In an abrupt reversal of policy, the Spanish government, which had previously insisted that no additional state money would be needed to clean up the country's banking sector, confirmed that an intervention was being prepared.

Soon after the news broke, Rodrigo Rato, Bankia's executive chairman and a former International Monetary Fund managing director, resigned from the bank that had been formed in 2010 out of a merger of seven Spanish savings banks, or cajas.

Mariano Rajoy, Spain's prime minister, said in a radio interview that the government would consider injecting state funds into the banking sector if needed. Read More