Government to announce Banking regulations Friday

The central government is expected to officially announce further reaching measures to regulate the country's banks on Friday of this week.

However, as before, the only real solution here is to inject huge amounts of public money into the banking sector, which is something that the government are obviously reluctant to do at a time when millions of Spaniards are unemployed and thousands are holding regular protests against cuts to public spending and austerity measures.

Prime Minister Mariano Rajoy's cabinet is about to introduce legislation which will require banks to make provisions for a further €50 billion this year to cover the risk against losses on defaulted loan repayments.

The Government is also expected to announce that it will incentivise stronger banks to merge with weaker ones by buying contingent convertible bonds, which convert to equity when a bank' capital ratio falls under the agreed level, yielding 8 percent.