Bankia, the fourth largest bank in Spain, requires a €19 billion bailout after figures for 2011 show a loss of €2.89 billion rather that the €309 million profit reported in February.
It is the biggest bailout in Spanish history and exceeds the €15 billion allocated to the entire banking sector. Trading in Bankia shares was suspended on Friday after the news broke.
Bankia is already part-nationalised. Bankia was created in 2010 from the merger of seven struggling regional savings banks and just two weeks ago, the government intervened and awarded Bankia a €4.47 billion loan. Bankia holds €32 billion in distressed property assets.
The ratings agency Standard and Poor’s has downgraded the bank to ‘junk’ status.