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Bankia prepares to float

Source: AFP - Mon 14th Mar 2011

Spain's newly merged Bankia today appointed Bank of America-Merrill Lynch, Deutsche Bank, JP Morgan and UBS as the four Banks that we takes responsiblity for its stock market floatation.

All four Banks are to draft the structure of the initial public offering, with Bank Lazard acting as special advisor and responsibility for accounting overseen by Deloitte.

Bankia, which claims to have 10% of the market share, has been created as the result of a merger between seven cajas following news earlier on in the year, of stringent new banking regulations that required regional lenders to raise their core-capital ratios.

Following last year's EU stress tests, Spain' cajas reduced in from 45 to just 17 through a number of mergers , but are still considered the weak link in the country's financial system, largely due to property-related bad debt.

Under new regulations, the banks need to increase their core capital ratios from 6% to 8%, rising to 10.0% if they are not listed.

Recent data suggests that Bankia is the lender that the Bank of Spain are concerned requires the most capital to meet the new Banking requirements.

These new regulations mean that the lender requires 5.775 billion euros to reach a level of 10% of core capital, but it only needs to raise 1.795 billion if it floats on the stock market - the intention has always been to float the newly merged Bank.

Only last week the Bank of Spain reported that 12 banks require an injection of 15 billion euros to reach the required ratios, coming in below the government's estimation of 20 billion euros.

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