Banks need money, fast

Before the month ends, the Spanish government will pump 30 billion euros of emergency funding into nationalized banks: Bankia, CataluynaCaixa, Novagalicia and Banco de Valencia. The multi-billion euro aid package is part of the 100 billion euros that the euro group decided to provide Spanish banks with in hopes of satisfying their growing capital requirements as soon as possible.

The government's haste shows that these four lenders have serious liquidity problems, especially Bankia, which will receive the bulk of this first round of funding and be under close surveillance by EU authorities. The banks are struggling to figure out a way to make upcoming payments on debt, because their deposits are fleeing to more solvent banks that are, in turn, backing some of them.

The Bank of Spain estimated that 50 billion euros were transferred away from the four struggling banks last week. The good news is that the 30 billion euro injection will give the banks some more time before they have to undergo a cleanup process at the end of September once the consulting firm Oliver Wyman finishes its detailed analysis of what each lender needs in capital requirements.

The beginning of the cleanup process and the first "bad bank" that is created to take over around 89 billion euros in toxic assets from nationalized banks will have to form the foundation of a new financial system, one that controls its spending, nixes over-the-counter trading, strengthens solvency and deals transparently.