2012-05-07nytimes.com

Rodrigo Rato, the executive chairman of Bankia, resigned Monday before an anticipated government recapitalization of the company, Spain's largest real estate lender, which is sitting on €32 billion of troubled assets... this has raised concerns not only about the solvency of Spain's banks but of its economy as a whole.

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Prime Minister Mariano Rajoy confirmed for the first time Monday that such a rescue plan could involve public money. Earlier, he had pledged not to make taxpayers bear the cost of saving the banks.

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Bankia is now expected to receive €7 billion to €10 billion, or $9.1 billion to $13 billion, of additional state funding, in the form of convertible bonds, according to reports Monday in the Spanish media.

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Bankia was formed in 2010 in a merger of seven savings banks, or cajas. The government encouraged the consolidation of the cajas, which had spearheaded the financing of Spain's real estate boom and then found themselves saddled with the bulk of the industry's nonperforming property loans once the global financial crisis started and the Spanish construction sector collapsed.


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