* FROB to approve 4-5 bln euros funds for Bankia on Monday
* Money to cover losses, strengthen capital base
* Bank to receive funds by Sept. 14
By Jesús Aguado
MADRID, Sept 3 Spain's nationalised bank
BFA-Bankia will receive up to 5 billion euros ($6.30
billion) in emergency funds by Sept. 14, to cover steep losses
and comply with stringent capital requirements, a source with
knowledge of the matter said.
The capital injection of between 4 and 5 billion euros in
the lender is set to be approved on Monday by the national bank
rescue fund FROB, the source added.
It follows weeks of wrangling behind closed doors between
Madrid and the European authorities on the need for help for the
lender, heavily exposed to soured real estate assets.
A spokesman for Bankia declined to comment.
Bankia reported on Friday losses of over 4 billion euros in
the first of half of 2012, while its core capital ratio -- a
measure of financial strength -- was 6.3 per cent.
Its parent company BFA had a capital ratio of 1.8 percent,
far below the 9 percent level the government requires lenders to
meet at the end of the year under the terms of the 100
billion-euro European aid for Spanish banks.
FROB has 4.14 billion euros available, according to the
Banking sources told Reuters that FROB could inject cash
into Bankia or use state-back debt instruments to capitalise the
bank, which it could in turn use as a collateral to obtain cash
from the European Central Bank.
That constitutes an advance on the 19 billion euros that
Bankia asked the state to inject as part of a total rescue
package of 23.5 billion euros.
Several senior sources told Reuters last month that the euro
zone wanted to wait for the conclusion of a final stress test of
Spain's wobbly banking sector to be published in the second half
of September before disbursing the first tranches of the aid.
In June, consultancy firm Oliver Wyman said Spain's banks
would need as much as 62 billion euros of extra capital from
funds to be made available under a European rescue package.
Shares in Bankia were 2.2 percent lower at 1.394 euros at
1039 GMT after temporarily paring losses when Spain's Economy
minister Luis de Guindos said on Onda Cero radio that the FROB
board would approve the decision to inject capital "in the next
De Guindos also said Spain remained committed to meeting its
EU-agreed deficit target of 6.3 percent of its gross domestic
product in 2012 despite bad data for the first seven months of
"We have to go from a public deficit of 9 percent last year
to 6.3 percent this year, a reduction of almost three percentage
points in a recession environment," he said.
Spain reported a deficit of 8.9 percent of GDP last year,
but has recently revised down economic growth for last year,
which might have bumped the deficit figure up a little.