UPDATE 1-Spain says banks CEISS, Banco Gallego in negative equity

Fri Feb 8, 2013 7:40am EST

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MADRID Feb 8 (Reuters) - Two small Spanish banks set to receive European bail-out funds have negative equity, or an excess of debt over assets, Spain's bank restructuring fund, the FROB, said on Friday in a step towards evaluating how much public money they will receive.

CEISS and Banco Gallego have a negative equity of 288 million euros ($386 million) and 150 million euros respectively, the bank restructuring fund, the FROB, said. Lenders Liberbank, Caja 3 and BMN are in positive equity.

CEISS, Liberbank, Caja 3 and BMN are set to receive a cash injection of 1.87 billion euros in the second phase of an overhaul of the banking sector which ran into trouble when a property boom ended five years ago.

In return for the funds, the four lenders will reduce their balance sheets by up to 40 percent by 2017 by selling assets and slashing their workforce.

The FROB said in December that state-rescued bank Bankia , which has received 18 billion euros from Europe, had negative equity of 4.2 billion euros while its parent company BFA had negative equity of 10.4 billion euros.

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