HispanicBusiness

The distressed Spanish bank Bankia was on Friday preparing to present a restructuring plan in which it was expected to ask for a massive capital injection from the Spanish government.

Spain's fourth-largest bank could ask for as much as 20 billion euros (25 billion dollars) after its new management meets later on Friday, the daily El Pais said.

Sources from the financial sector spoke of more than 15 billion euros. The new figures came just a day after Economy Minister Luis de Guindos had estimated the necessary amount at 9 billion euros.

Bankia may not make its plans public before Saturday, media reported.

Trading in Bankia shares was meanwhile suspended on the Madrid stock exchange. Stock market regulator CNMV attributed the suspension to "circumstances that could affect trading." Bankia shares had fallen by more than 7 per cent on Thursday.

Bankia - a combination of seven savings banks - was partly nationalized earlier this month after its chairman Rodrigo Rato resigned. He was succeeded by Jose Ignacio Goirigolzarri, a former chief executive at BBVA bank.

Bankia is the bank most exposed to the collapse of Spain's property bubble during the global crisis. It holds about 32 billion euros in toxic real estate assets.

The bank was now expected to ask for the maximum amount of state funds it could get to solve its financial problems once and for all.

The new capital coming from the government would help Bankia cover the risks represented by real estate and other problematic assets.

It would come on top of 4.5 billion euros which Bankia received from the bank restructuration fund FROB in 2010. Those credits were converted into equity to allow the state to take a 45-per-cent stake in Bankia when it was nationalized.

Bankia's estimated needs revealed a gross under-estimate by the government, which had said all Spanish banks would need less than 15 billion euros in state loans to cover provisions for real estate assets.

In exchange for helping Bankia, the government wants the bank to streamline its boards of management and to replace politicians with independent board members. The bank needed to make its management more "professional," de Guindos said. Politicization has been a typical problem affecting Spain's regional savings banks.

The government was meanwhile considering a merger between Bankia and two other lenders, Catalunya Banc and Novagalicia Banco, which have also been nationalized, the daily El Mundo reported.

The merger would be aimed at stabilizing the banks' finances. The merged bank, which would be Spain's biggest public bank and a rival to top banks such as Santander or BBVA, with 18 million clients, would be privatized later on, according to the daily.