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Spain to tap 40 billion in EU funds for banks

Source: Reuters - Mon 26th Nov 2012
Spain to tap 40 billion in EU funds for banks

Spanish Economy Minister Luis De Guindos confirmed on Monday that the country's government would request around 40 billion in European financial aid for its troubled banks.

"For the nationalized banks (...) the amount is going to be around 37 billion. In all, we are talking about 40 billion, which is the number we have always had in mind, about 3.5% of GDP," he told reporters in Brussels.

The total takes into account a public capital injection for the bad bank and some limited capital needs for banks which have not been fully nationalized.

Spain was granted up to 100 billion of aid in June as part of a euro zone rescue fund to clean up a banking sector crippled since a property bubble burst 5 years ago. Newspapers and ministers have talked about an initial tranche of around 40 billion that had until now not been officially confirmed.

Bankia, which sought a 23.5 billion bailout from the state in May, is expected to take the majority of the bailout money. The other 3 already nationalized lenders are Novagalicia, CatalunyaCaixa and Banco de Valencia.

El Pais reported on Monday that apart from the 37 billion to be disbursed to these 4 lenders 2.5 billion would be injected to capitalize the recently-created bad bank, known as SAREB.

The newspaper said an additional 2 - 3 of EU funds would be used for other banks that may need public money.

On Sunday, El Pais said European authorities would transfer 35 billion to Spain's state bank rescue fund on December 15 in exchange for massive lay-offs at the 4 nationalized banks.

This followed comments by Spain's deputy economy minister Miguel Temboury last week that the country would probably tap less than 40 billion of aid from the euro zone rescue fund.

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