Spain's Bankia seeks €19 billion bailout

The board of directors of Spain's troubled bank, Bankia SA, has said it has agreed to ask for €19 billion in state funds.

In a statement released late on Friday the bank's president, Jose Ignacio Goirigolzarri said the recapitalisation would "reinforce the solvency, liquidity and solidity of the bank".

His comments came after Bankia restated its results - saying it made a €2.98 billion loss for 2011 rather than the €309 million in profit it announced in February - and asked for the aid from Spain's bank bailout fund, FROB.

The decision came on the same day as credit rating agency Standard & Poor's downgraded Bankia and four other Spanish banks to junk status because of uncertainty over their restructuring and recapitalisation plans.

Executives have called a news conference for Saturday in which they are to outline a restructuring plan after the bank restated its 2011 figures, admitting massive losses.

Trading in shares in Bankia - Spain's fourth-largest bank - were suspended by the Madrid stockmarket on Friday.

Bankia is already part-nationalised.

Europe is watching the banking sector in the region closely amid the economic crisis.

Spanish banks, which lent heavily during the property bubble, are seen as particularly shaky as they now hold massive amounts of soured investments.

Analysts say the bailout of Bankia would be the biggest of its kind in Spanish history.

Two weeks ago, the government intervened and awarded Bankia a €4.47 billion loan.

Bankia had to reassure savers last week that their money was safe after a Spanish newspaper reported a run on the bank.

Bankia was created in 2010 from the merger of seven struggling regional savings banks. It holds €32 billion in distressed property assets.

Its shares fell 7.4% on Thursday to close at €1.57, down 58% from their listing price in July 2011.

There have been four attempts by Spanish governments to shore up the banking system since the global financial crisis of 2008.

As part of the latest plan, lenders are having to make €30 billion of extra provisions to cover potential losses on property loans. This is in addition to 54 billion they were ordered to set aside in February.

The health of Spain's banking system is key to whether the country eventually needs to seek a bailout itself from the eurozone and the International Monetary Fund (IMF).

Spain's credit rating was downgraded by S&P last month on the basis that it would probably have to take on more debt to support its banks.