The Spanish government plans to take a majority stake of 65 percent in small, unlisted lender Banco Mare Nostrum after providing capital and converting preference shares into capital.
BMN said last week that the Fondo de Reestructuracion Ordenada Bancaria, or FROB, the nation’s bank restructuring fund, would convert $1.22 billion into capital in preference shares and contribute to a capital increase of $977 million, the Guardian reports.
While FROB would have a controlling stake of 65 percent, the remaining 35 percent would be owned by savings banks Caja Murcia, Caja Granada and Sa Nostra, which established BMN in 2010.
After selling Banco de Valencia to CaixaBank, the FROB now controls Bankia, Catalunya Banc and NCG Banco, according to the Guardian.
Last fall, when Spain received a $48 billion bailout from the European Stability Mechanism to aid its struggling financial sector, it agreed to lay off thousands of employees, close offices and restructure some of its banks.
BMN was identified by independent auditor Oliver Wyman as one of seven banks that would need additional capital to survive a severe economic crisis. The bank was identified as being short $2.9 billion in capital in an adverse economic scenario, the Chicago Tribune reports.