Spanish PM: Banks won’t need rescue

Spanish PM: Banks won’t need rescue

MADRID

Conservative Spanish Prime Minister Mariano Rajoy insisted Monday that the country’s banking sector would not need an international rescue as concern over the bailout of nationalized lender Bankia sent its stock price plummeting while Spain’s borrowing costs soared.

“There will be no rescue of the Spanish banking sector,” Rajoy told a press conference.

However, he added that the government had no choice but to bail out Bankia, which has been crippled by Spain’s real- estate slump.

“We took the bull by the horns because the alternative was collapse,” said Rajoy, stressing that Bankia clients’ savings were now safer than ever.

Bankia, Spain’s fourth-largest bank, is estimated to have 32 billion euros in toxic assets and was effectively nationalized earlier this month when the government converted 4.5 billion euros in rescue funds it gave last June into shares.

The lender’s shares fell 28 percent on opening in Madrid on Monday — Bankia’s first day back on the stock exchange after its announcement Friday that it would need the 19 billion euros in state aid to shore itself up against its bad loans, a far bigger bailout than expected. The shares, which recovered slightly in the afternoon, closed 13.4 percent lower at 1.36 euros.

Bank of Spain estimates show Spain’s lenders are sitting on some 180 billion euros in assets that could cause them losses.

From wire reports