Spain has nationalised crippled lender Bankia in a dramatic move to contain the esalating crisis and restore faith in the country's management.

Rodrigo Rato stepped down as chairman of Bankia on Monday Photo: Reuters

The forced rescue was ordered by premier Mariano Rajoy after auditors Deloitte refused to sign off the bank's books, amid allegations of €3.5bn (£2.8bn) of inflated assets. Half of the bank's €37bn of property exposure is deemed "problematic" by regulators.

The lender has asked for €4.5bn in loans, converting the cash into ordinary shares. The Spanish government holding 45pc of the bank in return. Bank of Spain has also demanded Bankia dispose of assets as part of the rescue.

"The Spanish have denied until now that there was any need for fresh capital so it comes as a surprise. It wasn't intended, and that is a worry," said Guy Mandy, credit strategist at Nomura.

http://www.telegraph.co.uk/finance/financialcrisis/9255621/Spain-na...

BY CHRISTOPHER BJORK AND JONATHAN HOUSE

MADRID (Dow Jones)--The Spanish government said late Wednesday that it will rescue Bankia SA (BKIA.MC) by taking a large stake in the troubled lender, a move considered to be a crucial element in its effort to overhaul the country's banking sector and shore up confidence in the euro zone's fourth-largest economy.

The country's central bank said that Bankia's new chairman, Jose Ignacio Goirigolzarri, had requested the move.

http://online.wsj.com/article/SB10001424052702304070304577394220289...