* Spanish cabinet to approve bad bank Friday - minister
* Creation of entity will trigger release of bank aid
* Says not negotiating more austerity measures with EU
MADRID, Aug 29 Spanish and European Union
officials have agreed on the framework for a 'bad bank' to take
on the toxic assets plaguing the country's financial sector, its
economy minister said, paving the way for the release of
Spain must set up the new vehicle to cleanse the sector of
soured loans and repossessed real estate that have built up
since a decade-long property bubble burst four years ago.
The government will approve its regulatory framework on
Friday, minister Luis de Guindos told reporters.
Establishing the bad bank is one of the conditions attached
to up to 100 billion euros ($126 billion) in European aid for
the financial sector that Spain was granted in June.
A technical mission from the European Commission, the ECB
and the International Monetary Fund met officials from the Bank
of Spain and the economy ministry in Madrid last Friday to
discuss the bad bank's creation.
"There has not been any disagreement with Brussels," de
The government is also set on Friday to grant its central
bank new powers to intervene more rapidly in struggling lenders,
and the country's bank rescue fund (FROB) will gain more
capacity to wind them down if they fail, according to the draft
for a new law obtained by Reuters..
De Guindos reiterated that Spain has not yet formally
decided whether to request a wider EU bailout that would
contribute to reducing the country's high borrowing costs.
In this regard, he said Spain is not currently negotiating
any further austerity measures in exchange for the potential use
of the European rescue fund to purchase government debt.