EU gives temporary approval for Spanish Bankia aid

(BRUSSELS) - The European Commission gave temporary approval on Monday to a 4.5-billion-euro capital increase for Spain's BFA bank group, aimed at troubled Bankia.

"The European Commission has temporarily approved, under EU state aid rules, a 4.5 billion euro ($5.75 billion) capital increase for the Spanish banking group BFA," said a statement from the European Union executive.

The agreement is contingent on acceptance of a restructuring plan the Spanish government must present in time to allow competition authorities to make a final decision by November 2012, the statement said.

Spain has agreed to push through changes as a condition for receiving a banking sector rescue loan of up to 100 billion euros from its eurozone partners.

Spain's cabinet approved a major financial reform package at the end of August including the creation of a "bad bank" to buy troubled property assets and bad loans from lenders such as Bankia.

Spanish banks have been weighed down with rising bad loans and repossessed real estate since the collapse of a property bubble in 2008, which sent the jobless rate soaring to nearly 25 percent.