Spain launches $12.7bn bank fund

Caja Castilla had to be rescued by the Spanish government

Spain has launched a 9bn euro ($12.7bn; £7.7bn) fund in case any of its troubled banks needs rescuing.

Finance Minister Elena Salgado said the money could be used for capital injections, mergers or restructuring.

She said the Fund for Ordered Bank Restructuring would start off with 9bn euros, but that the size of the fund could rise to 90bn euros.

In March, the Bank of Spain took over a regional savings bank in the country's first bail-out of the current crisis.

"We think this is a very good time to carry out an orderly process of restructuring our country's financial system, or at least starting it," Mrs Salgado said.

Many Spanish banks invested heavily in the country's property markets and expanded rapidly.

Now that the value of most housing has fallen substantially, many banks have been stuck with rising amounts of bad loans.

Caja Castilla la Mancha was rescued in March, and concerns about the health of the banking sector have hit the share prices of banking giants such as Santander and BBVA this year.