Spain's plan to recapitalise its troubled lender Bankia through a €19billion 'backdoor bailout' has been rejected as 'unacceptable' by European banking officials.

Madrid said it wanted to inject the amount in sovereign bonds into the bank's parent firm, and then swap it for cash at the European Central Bank's three-month refinancing window. This would, it said, avoid the need to raise the money on bond markets. But the ECB said a proper capital injection was needed for the country's fourth largest banking institution, reports the Financial Times.

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