By LOS ANGELES — Spanish banks will pay up a record amount of money in the wake of a global economic downturn, with the state paying €1 billion ($1.7 billion) in cash and equity as it pays out on a deal that will help revive Spanish banking, the government said Wednesday.
The deal, reached in September by the government and the country’s two largest banks, gives the Spanish government a 10% stake in the bank, according to government spokesman Javier Leal.
The government will pay 100% of the bank’s assets and the remaining shares in a public offering, Leal said.
The banks will get the money from an equity investment and an initial public offering that will raise $3.4 billion, according a statement.
The money is being used to help support Spanish banking in the aftermath of a worldwide economic downturn.
The Spanish government is paying cash and capital to banks as part of a plan to stimulate the economy, Leall said.
The banks will be required to hold a minimum of 60% of their assets in cash or other forms of assets, and to keep their books in order, according the statement.
The government also will offer other incentives, including guarantees for Spanish banks that have a minimum capital of 50% of gross domestic product.
The announcement comes as the world economy continues to taper, with unemployment in the U.S. continuing to climb.
But Spain’s financial sector has been battered by the collapse in oil prices, as well as an economic slowdown in Europe.
The country’s economy contracted by 2.5% last year.