EU approves Spanish state aid, guarantees for Bankia

(BRUSSELS) - The European Union's executive arm approved on Wednesday a 4.5-billion-euro package of Spanish state aid and a 19-billion-euro guarantee from Madrid for troubled Bankia.

"The European Commission has temporarily approved, under EU state aid rules, a conversion of existing state-owned preference shares of 4.465 billion euros into equity and a liquidity guarantee amounting to 19 billion euros in favour of the Spanish BFA group and its subsidiary Bankia," said a statement.

"Spain has committed to provide a restructuring plan for BFA and Bankia within six months.

"The approved aid does not include announced capital injections sought by BFA and which are currently under assessment by the Spanish authorities," it added.

In May, Bankia revised its 2011 results from a net profit of 309 million euros ($387 million) to a loss of nearly three billion euros and asked the state for a bailout of 19 billion euros, the largest in Spanish history.

This would come on top of the 4.5 billion euros in state loans that the government converted into equity in Bankia's parent company BFA earlier last month as part of the state takeover aimed at saving the lender from insolvency.

Eurozone finance ministers this month decided to make a loan of up to 100 billion euros available to the Spanish government to prop up banks laden with bad loans following the collapse of a real estate bubble.