Aug 31 - Spain's government is setting up a so-called bad bank to isolate tens of billions of euros in bad loans, while nationalised lender, Bankia's first half losses were cause for instant European aid. Joanne Nicholson reports
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Spain's government announces an overhaul of its banks - for the fifth time in three years
They're hoping to secure the hundred billion euros of European aid that was agreed - to shore up the ailing banking sector said Economy Minister Luis de Guindos
(SOUNDBITE)(Spanish) SPAIN'S ECONOMY MINISTER LUIS DE GUINDOS, SAYING:
"Guarantees of a healthy banking system are crucial from the savers' point of view and for the credit flow. There can't be a sustainable and solid recovery without sustainable credit and without a solvent banking system."
The government has created a so-called bad bank to take over tens of billions of euros in defaulted loans
Spain's fourth biggest lender, Bankia, has just posted losses of 4 and a half billion euros for the first half of the year.
It was nationalised in May, and that was just the beginning for the rest of Spain's banks.
The bank rescue fund says it will now inject capital into Bankia immediately
The "bad bank" will begin operating in late November or early December, and has been granted a lifespan of 10-15 years.
It must be profitable in that time so taxpayers don't bear the burden of the bank rescue.
Joanne Nicholson, Reuters
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