EU approves restructuring of four Spanish banks

The European Commission (EC), executive arm of the European Union, has agreed to bail out four Spanish banks by injecting approximately €37 billion ($48 billion).

EC has approved the restructuring plans of the four banks BFA-Bankia, NCG Banco, Catalunya Banc and Banco de Valencia, which according to the commission are in line with EU rescue rules.

The banks will have to reduce their balance sheet by 60 per cent in five years, through cost reduction and job cuts.

EC vice president in charge of competition policy Joaquin Almunia said, "The approval of the restructuring plans of BFA-Bankia, NCG Banco, Catalunya Banc and Banco de Valencia is a milestone in the implementation of the memorandum of understanding (MoU) between euro area countries and Spain.''

''Our objective is to restore the viability of banks receiving aid so that they are able to function without public support in the future,'' Almunia further stated.

The EC support is provided based on the MoU concluded between Spain and eurozone nations earlier in July. (See: Euro zone to lend $37 bn to Spain's distressed banks)