A woman uses an ATM cash point machine at a branch of the Bankia bank in Madrid Thursday May 17, 2012. A recently nationalized Spanish bank's shares plummeted Thursday after a newspaper said depositors were rushing to withdraw money, while the country paid sharply higher interest rates in a debt auction, reflecting concerns the country will be caught up in the fallout of the Greek crisis. Logo says ' Welcome to Bankia'. (AP Photo/Paul White)
A woman uses an ATM cash point machine at a branch of the Bankia bank in Madrid Thursday May 17, 2012. A recently nationalized Spanish bank's shares plummeted Thursday after a newspaper said depositors were rushing to withdraw money, while the country paid sharply higher interest rates in a debt auction, reflecting concerns the country will be caught up in the fallout of the Greek crisis. Logo says ' Welcome to Bankia'. (AP Photo/Paul White)
People is seen reflected in the glass building of the Bankia bank headquarters in Madrid, Friday, May 18, 2012. Shares in Bankia, SA, a recently nationalized bank that is heavily laden with toxic assets _ shot back up 24 percent after losing 14 percent Thursday in a session in which they had plummeted as much as 27 percent on a media report that depositors had withdrawn euros1 billion in the week since the state took over. (AP Photo/Daniel Ochoa de Olza)
MADRID (AP) ? The board of bailed-out Spanish lender Bankia will hold a meeting on Friday to decide how much more rescue money it needs from the government, an issue so sensitive it asked that trading in its shares be suspended all day.
Bankia, the country's fourth-largest lender, has seen its shares whip about violently in recent weeks on fears it could succumb to the massive losses it has built up in the country's collapsed real estate sector. The board meeting will start in the early afternoon, but details will be announced only on Saturday, with stock markets still closed.
The Spanish government, which has already taken a controlling stake in Bankia, said this week it would pump at least ?9 billion ($11 billion) into the lender but added that more would be available if needed. Spanish newspapers quoted unnamed market sources as saying the bank will likely ask for up to ?15 billion ($19 billion). Neither the bank nor the Economy Ministry would comment on the reports.
"I don't know if the figures will be greater or smaller than those being talked about because I am not responsible for the information that is coming out," said Deputy Prime Minister Soraya Saenz de Santamaria at a weeky government press conference.
Spanish banks were heavily exposed to the country's burst real estate bubble and now hold massive amounts of soured investments, such as defaulted mortgage loans or devalued property. Bankia has been the worst-hit and holds ?32 billion ($40 billion) in such toxic assets.
Bankia S.A. was created from the merger of seven regional banks, or cajas, that were deemed too weak to stand alone. But financial concerns have continued to plague it ? the price of its shares has fallen more than 50 since they went public last July. The government decided to intervene earlier this month, effectively nationalizing Bankia. Its shares closed at ?1.6 ($2.01) on Thursday after shedding more than 7 percent.
The Spanish government is trying to shore up the banking sector to get credit flowing to the ailing economy. But the cost of rescuing banks could overwhelm government finances, which are strained by a recession and an unemployment rate of nearly 25 percent. The possibility that the Spanish government might eventually need an international rescue package ? like the ones Greece, Ireland and Portugal sought ? has kept investors on edge for months.
Asked whether Spain would seek outside help for its banks, Saenz de Santamaria, reiterated the government's position, saying firmly, "Not at all."
Concern about the health of banks is a key factor in Europe's financial crisis. While Spanish banks suffer mainly from soured real estate investments, they and their counterparts across Europe also hold massive amounts of shaky government bonds. As the financial crisis worsens, those bonds lose value, hurting the banks.
One key fear is that if Greece eventually leaves the euro, confidence in other financially weak countries like Spain and Italy could fall, causing the value of their bonds to drop. Ultimately, the fear is that could undermine confidence in the system and create bank runs.
The flare-up in the debt crisis in recent months, with a Greek exit from the euro openly discussed, has sent Spain's borrowing costs soaring to levels that Prime Minister Mariano Rajoy said the country could not put up with for very long.
The yield for key 10-year bonds on the secondary market ? an indicator of investor wariness ? edged up 0.02 percentage points to a perilously high 6.18 percent in early afternoon trading. A rate of 7 percent is considered unsustainable over the long term.
Foreign investors in particular appear to be dumping Spanish government debt. In the first four months of the year the amount they held fell 24 percent to ?213 billion, according to the latest figures released Friday by the Economy Ministry. As of the end of 2011, foreign investors held just over 50 percent of Spain's debt but by the end of April that figure dropped to 37.3 percent.
In yet another bid to boost the recession-plagued economy, the government approved a reform to cut red tape and make it easier for Spaniards to open small businesses. Under the reform, would-be merchants would simply have to pay a tax and file a single document with their local town hall to start work. Now, the process can take as much as 18 months, Saenz de Santamaria said.
In a time of crisis, for entrepreneurs "the least the government can do is roll out the red carpet to open up, and not create difficulties to get their business and jobs rolling," Saenz de Santamaria said.
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Daniel Woolls contributed to this report
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