Spain is considering directly injecting its own government debt into Bankia and its parent BFA to help fund the stricken lender’s €19bn nationalisation, in an attempt to sidestep borrowing money directly from the bond markets.
The plan, viewed as unorthodox by analysts, involves Madrid issuing Spanish government-guaranteed debt to Bankia in return for equity, with the bank then able to deposit the bonds with the European Central Bank as collateral for cash.
On Friday Bankia, Spain’s third-biggest lender by assets, announced the state would invest €19bn in the country’s largest ever bailout, with the government expected to control about 90 per cent of its shares.
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