ECB rejects Spain's Bankia bailout plan

Spain has seen its plan to recapitalise stricken Bankia by indirectly asking the ECB for cash rejected by the ECB, the FT reports.

As Spanish government bond yields reach worrying highs and the government’s borrowing costs look unsustainable, it now faces the challenge of containing contagion in the banking sector. Madrid had tentatively suggested the idea over the weekend of recapitalising Bankia by injecting €19bn of sovereign bonds into its parent company, which could then be swapped for cash at the ECB’s three-month refinancing window,. This would avoid Spain having to tap the bond markets for cash. The ECB told Madrid a proper capital injection is needed for Bankia and its plans are in danger of breaching an...