Madrid - Spain's government was scrambling to shore up the country's fourth-largest bank after it announced half-year losses of 5.6 billion dollars on Friday.

The losses reported by Bankia were the highest in the history of Spain's banking industry.

The government said the emergency injection would come from a fund established to help the troubled financial sector and avert the need to seek an advance from the European Union's bailout funds.

Officials did not specify the amount of capital to be injected. The government took over Bankia in May.

According to data reported by Bankia, the nationalisation was followed by a run on deposits of nearly 8 billion dollars.

The cabinet also said it would set up a “bad bank” to take over non-performing assets from the financial sector and allow the banks to concentrate on getting credit flowing back into the market.

The new entity would begin operating in November under the control of the nation's central bank, and seek to sell real estate assets. - Sapa-dpa