The European Commission has given temporary approval for a 4.5 billion-euro (3.6 billion pounds) capital increase to be provided to Spain's BFA-Bankia , the EU executive said on Monday.
"The European Commission has temporarily approved, under EU state aid rules, a 4.5 billion euro capital increase for the Spanish banking group BFA, which will restore the capital position of the BFA Group and ensure its access to different funding sources," the Commission said.
"The Spanish authorities have committed to present a restructuring plan in time to allow the Commission to approve the plan by November 2012."
The announcement came as the Commission draws up plans for a banking union to tackle the region's debt crisis. The Commission is trying to prevent problem banks, such as Bankia, from sucking weak euro zone countries deeper into the crisis as they borrow to finance bailouts.
The Commission will on Wednesday propose that the European Central Bank be given power to police banks across the euro zone and penalise or even shut down those that are unviable.
(Reporting by Foo Yun Chee. Writing by Sebastian Moffett)