The European Commission has temporarily approved a conversion of existing state owned preference shares of €4,465 billion into equity and a liquidity guarantee amounting to €19 billion in favour of the Spanish BFA group and its subsidiary Bankia. With the now approved conversion of preference shares into equity, FROB holds 100% of BFA.

Under EU State aid rules, the European Commission approved the state support for Spanish Bankia/BFA. In particular, the conversion of existing state owned preference shares of €4,465 billion into equity and a liquidity guarantee amounting to €19 billion in favour of the Spanish BFA group and its subsidiary Bankia. Nonetheless, this aid does not include announced capital injections sought by BFA and which are currently under assessment by the Spanish authorities. Recently the President of the Eurogroup also confirmed the request for financial assistance from Spain and Cyprus.

Commission Vice president in charge of competition policy Joaquín Almunia underlined that there is no doubt that the beneficiary will need to undergo deep restructuring. The conversion of preference shares into capital will simplify the ownership structure of BFA, which becomes fully State owned, thus making the necessary restructuring decisions easier to take. Spain has committed to provide a restructuring plan for BFA and Bankia within six months.

Bankia is the banking arm of BFA Group, resulting from the merger of seven Spanish savings banks. It is a large universal bank, with presence in all main business segments: mortgage and consumer lending, SMEs, large corporations as well as public and private institutions. In 2010, the group received an injection of preference shares of €4,465 billion provided under the Spanish banking restructuring fund FROB, approved by the Commission in the framework of the Spanish recapitalisation scheme in 2010.