Spain's government on Friday approved a new financial sector overhaul required by Brussels as a part of a bank-rescue program, creating an asset-management agency - or "bad bank" - to segregate troubled real-estate assets and paving the way for the orderly resolution of non-viable entities.

The overhaul, the third enacted by Prime Minister Mariano Rajoy's conservative administration since he took office in December, also requires all banks to raise their core capital ratio - a key measure of solvency - from 8 percent to 9 percent.

Deputy Prime Minister Soraya Saenz de Santamaria said in presenting the overhaul in a press conference that it is "a national necessity, essential to recover the loans and financing" urgently needed by small and medium enterprises.

The overhaul, required as a condition for a recently approved euro-zone bailout of up to 100 billion euros ($125.6 billion) for ailing Spanish banks, also bolsters the powers of the state-backed FROB bank-restructuring fund.

Saenz de Santamaria said the new mechanisms mark the final step in a plan to shore up Spain's financial institutions.

She said the goal of the overhaul is to "drive economic growth and employment" and "invigorate the real-estate sector" so banks can put up for sale the large stock of foreclosed homes they are carrying on their balance sheets in the wake of the bursting of a long-building real-estate bubble.

The property collapse in the context of the global financial crisis sent Spain into a severe economic decline. The country is currently in recession for the second time in three years and the unemployment rate stands at nearly 25 percent overall and more than 50 percent among young people.

Economy Minister Luis de Guindos said in the same press conference that the idea of the latest bank overhaul is for it to be a key factor in lifting Spain out of its deep economic crisis "without costing the taxpayer one euro."

"If we had had rules like this in place (earlier), the Spanish banking crisis could have been addressed in a totally different way," the minister said.

The idea is for shareholders and bondholders to bear the cost of the restructuring and/or resolution of weak banks "to minimize the impact on public funds, in other words on taxpayers' money."

Referring to the new measures, De Guindos touted the creation of a "poorly named bad bank," which will acquire financial institutions' "not so bad" assets.

He said more safeguards will be put in place for the benefit of banks' minority shareholders, protecting them against the improper marketing of certain investment vehicles.

Another measure lowers the salary ceiling for executives of banks in need of public assistance from 600,000 euros ($754,300), established in February, to 500,000 euros ($628,500)

Banks operating in Spain posted combined net income of 3.2 billion euros ($4.02 billion) in the first half of 2012, down 51.7 percent from the same period last year due to their significant efforts to boost loan-loss provisions.

The Spanish Banking Association, or AEB, for its part, said Friday that the cost to financial institutions of write-downs and provisions for loan losses through the end of June amounted to 16.5 billion euros ($20.7 billion), 64 percent more than in June 2011.

Credit grew 6 percent between January and June compared to the same six-month period of 2011, while the banking sector's non-performing loans ratio climbed to 5.2 percent at the end of June, up from 4.5 percent in that same month last year, the AEB said.

Net capital outflows from Spain - excluding central bank operations - totaled 219.82 billion euros ($276.4 billion) in the first half of the year, a record high.

That compares with a net capital inflow of 22.46 billion euros ($28.2 billion) in the first half of 2011, according to figures published Friday by the Bank of Spain.

Net outflows totaled 56.63 billion euros ($71.2 billion) in June alone.

Spain has posted net outflows for 12 consecutive months, although the bulk of those funds corresponds to interbank transactions. The portion involving bank deposits of companies and families that have left Spain is relatively small, amounting to 8.32 billion euros ($10.46 billion) between January and June. EFE