| MADRID, June 5
MADRID, June 5 Bankia, Spain's
fourth-largest bank, could get less than the 19 billion euros
(US $23.68 billion) in aid it has asked for, two sources said on
Tuesday, prolonging uncertainty surrounding a rescue that has
added to fears that Spain itself would need a bailout.
The 19 billion euros would be on top of about 4.5 billion
euros Madrid has already put into the bank.
Spain's government is in the process of nationalizing the
bank, which has struggled under the weight of souring real
estate assets after a property bubble that burst four years ago.
But the amount needed for the rescue may have been overestimated
and Bankia may end up getting less bailout money, the sources
said, adding that the final figure would only emerge after a
series of other audits.
Bankia's management said on May 25 in a stock exchange
announcement that the bank needed 19 billion euros, and it
offered a timeline for recapitalization that would be
coordinated with the Bank of Spain and the government.
On Tuesday, one of the sources said that amount would have to
be approved by the Spanish rescue fund FROB and the Bank of
Spain, which would take until the end of August. The government
also is waiting for an International Monetary Fund report on
Spain's banks, due next week, and the results of an audit
stress-testing Spain's banking sector, due out in two phases,
the first at the end of June and the next at the end of August,
the sources said.
"Relative to Bankia, all that was said [by the Spanish
government] was that it would be given the money it needs," a
government source said. Spanish Economy Minister Luis de Guindos
told Congress days before Bankia asked for the 19 billion euros,
that "the government would fully support the capital needs that
result from (Bankia's) plan."
The source said Bankia's proposal would be presented to the
government on June 11 at the same time its peers are due to tell
the government how they will meet new rules on recognizing heavy
losses related to the property market.
"From then onwards we'll have 15 days to evaluate it. The
Bank of Spain will take a decision but that number is not
definitive. Bankia brought it up in a presentation, now
(Bankia's) plan will be analyzed," the government source said.
Bankia, listed last July after a merger of seven savings
banks in 2010, is an emblem of Spain's banking problems.
Thousands of small shareholders have seen their investments
wiped out, escalating political tensions over the rescue.
Less funding for Bankia would take a minimal amount of
strain off Spain at a time when its borrowing costs are reaching
all-time highs, effectively shutting it out of the bond market,
Treasury minister Cristobal Montoro said on Tuesday
Haggling over how much of a bailout Bankia actually needs
could compound uncertainty about Spain's financial future.
Investors raised questions about how aid would be given to
Bankia after a plan to inject government bonds into the bank so
they could be tendered at the European Central Bank was floated
and then abandoned.
Now the country's rescue fund is due to issue bonds to
finance the nationalization of Bankia, although the FROB's
access to markets is in doubt.
Spain may find some back-up for its cautious approach to
Bankia's rescue in Europe, with a senior EU source saying the
European Commission believed the needs had been overestimated.
But it also deepens the confusion around its approach. The
Spanish government hired U.S. investment bank Goldman Sachs
precisely to assess Bankia's recapitalization needs
before the bank's bailout request, and had appeared to give its
full support to the rescue needs.
Bankia had last month identified not just extra provisioning
needs against its real estate portfolio, but also 5.5 billion of
provisions to protect against defaults elsewhere in its loan
book and a further 6.7 billion euros related to revaluing its
tax credits and stakes in companies. ($1 = 0.8023 euros)