Spain Takes Control of Its Top Real Estate Lender MADRID - Spain has seized control of Bankia, the country's largest real estate lender, as a first step toward recapitalizing the company and before ordering other banks to add billions of euros in provisions for bad debt. Under the plan announced late Wednesday, a state-run bailout fund, known as Frob, will convert a previous €4.5 billion emergency loan into equity and thereby take full control of BFA, Bankia's parent company, and obtain a 45 percent stake in Bankia as well. The Economics Ministry described the Bankia intervention as "a first step to guarantee its solvency," suggesting that it was preparing the ground for a capital injection, expected to amount to between €7 billion and €10 billion, or $9 billion to $13 billion. The intervention had been expected following the surprise resignation on Monday of Rodrigo Rato, the executive chairman of Bankia, who is also a former finance minister and had served as managing director of the International Monetary Fund. Following its weekly cabinet meeting on Friday, the government is expected to announce further measures to strengthen the entire banking sector. Analysts are anticipating that banks will be required to set aside at least €30 billion more in provisions against bad loans, on top of the €50 billion of provisions already ordered in February by Luis de Guindos, the economics minister. Spanish banks are sitting on a combined €180 billion of troubled assets, about a third of which has been provisioned so far. The savings banks, or cajas, have been particularly hit by the downturn, having funded much of the decade-long property boom that came to an abrupt halt once the world financial crisis started. The government is hoping at this stage to clean up Spain's banking sector without having to receive outside funding, possibly by allowing banks to transfer their most toxic assets to state-guaranteed asset management companies. "The regulatory response by Spain to the current crisis will be crucial," said Tony Anderson, banking partner at Pinsent Masons, a London-based law firm. Whether the assets of these banks will be transferred to different vehicles, depending on their value, and whether the Spanish follow the U.K. in ring-fencing retail banking, will be key questions for banks in other euro zone jurisdictions. However, some analysts have suggested that the scope of Spain's banking problem, as well as a deepening recession that is fast pushing up the number of mortgage defaults, would eventually require international lenders to step in, led by the European Union and its European Stability Mechanism. Spain, meanwhile, is also facing rising borrowing costs, amid concerns about its own public finances as well as the political turmoil in Greece. "Right now, Spain is sliding down a very slippery slope," said Nicholas Spiro, managing director of Spiro Sovereign Strategy, a consulting firm in London that specializes in sovereign credit risk. "The economy is now officially back in recession, the government's plans to set up a "bad bank" are mired in uncertainty, unemployment is skyrocketing and, perhaps most worryingly, it is difficult to see what can be done in the near term - domestically and abroad - to stop the rot." As for Bankia, its shares have tumbled since Mr. Rato quit Monday. Bankia was the result of a merger of seven cajas in 2010 and was then floated last July, with most of the offering sold to domestic clients. This week's intervention has sparked a debate here about whether such an offering should have gone ahead and have been sold to retail investors, given the most recent disclosures about how vulnerable Bankia was to its portfolio of non-performing property assets.