after taking over Bankia SA,Spain to announce demands for the banks to set aside a further 35 billion euros

At its weekly cabinet meeting, the government will approve a plan to force banks to park their toxic real estate assets in holding companies that would later sell them off.

The cabinet is also expected to announce demands for the banks to set aside a further 35 billion euros ($45 billion) to cover sound loans in their real estate portfolios. The government has already forced banks to make provisions of 54 billion euros to cover bad assets.

"The text is being finalized after talks with the banks," a government source told Reuters, adding that both the new provisions and the "bad bank" scheme would be approved on Friday.

Earlier, financial sources had suggested the reform could be partly delayed to allow more time for negotiations between the government and major banks.

Hoping to put an end to its four-year banking crisis, Spain effectively took over Bankia SA, one of the country's biggest banks, this week after days of market anxiety over the lender's viability.

The Bankia takeover and expectations for further financial sector reforms pulled Spanish stocks off the nine-year low they hit a day earlier, with the blue-chip index rebounding 3.66 percent.

Spain's banks were hit by billions of euros of losses after a decade-long property bubble burst in 2008 and concerns about them, and the country's overspending regional governments, have fanned fears of a new euro zone debt crisis.

Sources:
Reuters