Banco Popular starts fund raising in Spain

Beleaguered Spain began the lengthy task of propping up its debt-laden banks yesterday as the nation's sixth-biggest bank set out plans to raise €2.5bn (£2bn).

The fund raising by Banco Popular came in the wake of an independent report warning that Spain's financial institutions needed €59.3bn in extra cash to weather a worsening recession in the country.

Despite the funding shortfall, shares in Spain's leading banks rose as investors welcomed an end to the uncertainty over their financial health. Santander and BBVA, Spain's two biggest banks, were adjudged to be adequately funded, with part-nationalised Bankia needing an extra €25bn.

Spain's 10-year borrowing costs also eased, although the Prime Minister, Mariano Rajoy, is still under pressure to accept a full-scale bailout.