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Bankia could be the biggest bailout in history at 23.5 billion euros

Bankia asked Spain for the biggest bank bailout in history. In an firm conference on Friday, Bankia approved a request for 19 billion euros in public aid, which would be added to the 4.465 billion that the firm received in 2010. The bailout could total to near 23.5 billion euros.

The aid, which would go toward cleaning up Bankia´s balance sheets, would be carried out in several phases through different waves of capital raising sourced from the Frob. The goal of the bailout is to raise Bankia´s solvency ratios above the minimum lows.

These capital requirements are more than twice what minister Luis de Guindos mentioned in a congressional meeting on Wednesday. He cited only 9 billion euros at that time.

The new Bankia president, José Ignacio Goirigolzarri, has carried out a deep review of the bank´s credit portfolio and the rest of its assets. After the review, the bank determined that its capital requirements equal nearly 12.745 billion euros, which is 4 billion more than it determined at an earlier time. Why the change? The latest round of financial reforms enacted by the Spanish government increased Bankia´s requirements. Toxic real estate assets comprise 48.9% of all risky assets for the bank.

Further, Bankia´s new team has decided that it?s necessary to carry out an adjustment of the valuation of the rest of its loans in order to prepare these assets for a potential adverse economic scenario. To back this risky exposure, the bank will need to come up with another 5.5 billion euros.