'No EU rescue' for Spanish banks
May 29 2012
Conservative Spanish prime minister Mariano Rajoy insists the country's banking sector will not need an international rescue as concern over the bailout of nationalised lender Bankia sent its stock price plummeting while Spain's borrowing costs soared.
"There will be no rescue of the Spanish banking sector," Mr Rajoy said.
But he added that the government had no choice but to bail out Bankia, which has been crippled by Spain's real estate slump.
"We took the bull by the horns because the alternative was collapse," said Mr Rajoy, stressing that Bankia clients' savings were now safer than ever.
Bankia, Spain's fourth-largest bank, is estimated to have 32 billion euro (£25.6 billion) in toxic assets and was effectively nationalised earlier this month when the government converted 4.5 billion euro (£3.6 billion) in rescue funds it gave last June into shares.
The lender's shares fell 28% on opening in Madrid - Bankia's first day back on the stock exchange following its announcement on Friday that it would need the 19 billion euro (£15.2 billion) in state aid to shore itself up against its bad loans, a far bigger bailout than expected. The shares, which recovered slightly in the afternoon, closed 13.4 % lower at 1.36 euro.
Bank of Spain estimates show Spain's lenders are sitting on some 180 billion euro (£144 billion) in assets that could cause them losses.
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