(Adds details, background)
By Sonya Dowsett
MADRID Dec 1 The Spanish government will pass a
law on Friday giving it until end-2019 to privatise
state-rescued lender Bankia in order to recoup the
most possible from its injection of funds as part of a 2012
bailout, a government source said on Thursday.
Bankia became the symbol of Spain's financial
crisis when it lost more than 19 billion euros ($26 billion) in
2012 because of soured real estate holdings.
Spain injected more than 22 billion euros in public money to
save Bankia from collapse in 2012, almost half of a
41.3-billion-euro European aid package for Spain's ailing
The Spanish government, which owns a majority stake of 65.5
percent of Bankia, had vowed to sell it off by the end of 2017
and announced plans in September to merge the lender with
state-owned Banco Mare Nostrum, known as BMN.
However, the head of Spain's bank restructuring fund, the
FROB, said last month that falling market values amongst banks
were making divestment harder.
Bankia bounced back quickly from huge losses on property
assets after these were transferred to an external 'bad bank'
backed by the state. Third quarter results in October showed the
bank making further progress in strengthening its capital
reserves and cleaning its loan book.
The bank underwent broad cost-cutting measures as a
condition for its bailout and is shifting lending to small
businesses and away from mortgages although, like most Spanish
banking peers, it is suffering from squeezed margins.
The European Central Bank and the European Commission have
said Spain should move ahead with the process of selling off
both Bankia and BMN. The European Commission was not immediately
available for comment. Bankia declined to comment.
(Additional reporting by Tomas Cobos; Editing by Alexandra