Spain to rescue major bank Bankia

The Spanish government is planning to rescue troubled lender Bankia SA that could involve pumping in billions of euros of taxpayers' money, a turnaround of its earlier stance that no public money will be used to salvage the nation's banks laden with toxic assets.

Bankia with its headquarters in Madrid and Valencia is a banking conglomerate that was formed in 2010 by merging the operations of seven regional savings banks or ''cajas.'' These included the Madrid savings bank and six other smaller banks including Bancaja from the Valencia region.

Bankia is the third-largest lender in the country with assets worth €306 billion and around 20,800 employees.

The bank's chairman, Rodrigo Rato, a former managing director of the International Monetary Fund (IMF) has announced his resignation, as the government is working on a bailout of the bank possibly with the use of contingent convertible bonds.

Rato has suggested Jose Ignacio Goirigolzarri, a former chief executive of banking major BBVA as his successor.

In an interview on Monday with Onda Cero radio, the Spanish prime minister Mariano Rajoy said, ''If it was necessary to reactivate credit, to save the Spanish financial system, I would not rule out injecting public funds, like all European countries have done.''
"But that would be a last resort," Rajoy emphasised.