By Simon Miller

The Spanish government part-nationalised its third largest bank last night (09.05.2012) after its auditors refused to sign off its books.

Bankia’s rescue was ordered by Spanish prime minister Mariano Rajoy after auditors Deloitte refused to sign off the bank’s books.

The bank was struggling amid alleagations of €3.5bn of inflated assets and half of its €37bn property exposure is considered problematic by regulators.

In return for €4.5bn in loans, the governmnet has taken 45% of bank shares and the Bank of Spain has also demanded that Bankia dispose of assets as part of the rescue.

In a statement, the Bank of Spain commented: “BFA [Banco Financiero y de Ahorros] has concluded that the most advisable option for strengthening the financial soundness of the business project now under way following the appointment of José Ignacio Goirigolzarri as the new chairman is to request the conversion of these securities into ordinary shares.”

It continued: “The events in recent weeks and the growing uncertainty over the institution's future have advised further action, with the provision of public funds being considered to expedite and increase the clean-up. The change at the helm of BFA-Bankia is precisely along the lines of making the management of the group more professional, and it will give impetus to its restructuring programme.”

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