MADRID – Spain's market regulator suspended trading of shares in bailed-outlender Bankia on Friday ahead of a key board meeting at which thelender is expected to decide how much more rescue money it needsfrom the government. A market commission statement said trading was being halted because"a concurrence of issues could affect the normal exchange of thebank's shares." Bankia's board meeting will start in the earlyafternoon, but details will be announced only on Saturday, thecompany said. Spanish banks were heavily exposed to the country's burst realestate bubble and now hold massive amounts of soured investments,such as defaulted mortgage loans or devalued property. Bankia,Spain's fourth largest bank, has been the worst-hit and holds 32billion ($40 billion) in such toxic assets. Bankia was created from the merger of seven regional banks, orcajas, that were deemed too weak to stand alone. |
But financialconcerns have continued to plague it — the price of itsshares has fallen more than 50 since they went public last July.The government decided to intervene earlier this month, effectivelynationalizing it. Bankia shares had closed at 1.6 ($2.01) onThursday after shedding more than 7 percent. Economy Minister Luis de Guindos said Wednesday the governmentwould pump at least 9 billion ($11 billion) into Bankia but addedthat more would be available if needed. Spanish newspapers quotedunnamed market sources as saying the bank will likely ask for up to 15 billion ($19 billion).
Neither the bank nor the EconomyMinistry would comment on the reports. The government is trying to shore up the banking sector to getcredit flowing to the ailing economy. But the cost of rescuingbanks could overwhelm government finances, which are strained by arecession and an unemployment rate of nearly 25 percent. Thepossibility that the Spanish government might eventually need aninternational rescue package — like the ones Greece, Irelandand Portugal sought — has kept investors on edge for months. Those uncertainties have sent Spain's borrowing costs soaring tolevels that Prime Minister Mariano Rajoy said Spain could not putup with for very long.
On Friday, the yield for key 10-year bonds on the secondary market— an indicator of investor wariness — edged down bysome 4 basis points but stayed perilously high at 6.08 percent. Arate of 7 percent is considered unsustainable over the long term.
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