After declarations and denials, Spanish Economy Minister Luis De Guindos has finally shed light on how the Government intends to proceed to strengthen Bankia. The credit institution that has more than 40 billion of toxic assets in its belly will be recapitalised through the orderly bank restructuring fund (Frob), which will seek funding in international markets and then issue bonds to refinance the institution.
“The usual mechanism will be used – declared De Guindos -. Issues of Frob in the capital markets and which, subsequently, depending on demand, will be injected” into Bankia. The minister took the opportunity to deny the journalistic rumors that spoke of a plan proposed to the European Central Bank. "The government has not presented any plans to the ECB because it has no reason to do so," he specified.
The Frob fund currently has an endowment of over 4 billion euros but last week Bankia asked for aid for 19 billion.
Meanwhile, the Spanish crisis is shaking the markets. The Madrid Stock Exchange loses 1% and the Bonos-Bund spread reached a new all-time high at 534 points before falling back to 532.
