The Spanish government is to part-nationalise embattled financier Bankia, it has emerged today (10 May).
Under the terms of a contract unveiled by the Bank of Spain (BoS), the central institution will take on a 45 per cent stake in shares at the struggling lender, which has run into trouble due to its exposure to the ongoing problems in the country's property sector.
At present, Bankia has €32 billion ($41 billion) worth of distressed property assets on its balance sheet and, as such, its €4.47 billion loan from the Spanish bailout fund will be converted into shares.
This means the central institution will hold almost half of all shares in the company, which was thrown further into disarray earlier this week (7 May) when chairman Rodrigo Rato resigned.
In a statement, the BoS insisted the new management of Bankia will have to quickly submit a "fortified clean-up plan that will place it in a position to address its future with every guarantee of success".
By Claire Archer