Santander rescues rival Banco Popular from collapse buying it for €1
The European Central Bank said earlier that the bank 'was failing or likely to fail'
Santander is to acquire troubled rival Banco Popular for €1 after European regulators said the lender was likely to fail.
The Spanish banking giant said it came out on top in a competitive sale process, adding that it will raise €7bn (£6.1bn) to cover the capital and provisions required to "reinforce the balance sheet of Banco Popular".
The money will be raised through a share capital increase and the deal will also see Santander take on Banco Popular's debt.
Shares in Banco Popular have slumped over 50 per cent since last week over concerns about the lender's capital position, which requires billions of euros in bolstering.
Loss-making Banco Popular has been stung by property loans gone bad and has been attempting to raise cash in recent weeks by selling off stakes in joint ventures.
The European Central Bank said earlier that the bank "was failing or likely to fail".
It added: "The significant deterioration of the liquidity situation of the bank in recent days led to a determination that the entity would have, in the near future, been unable to pay its debts or other liabilities as they fell due.
"Consequently, the ECB determined that the bank was failing or likely to fail and duly informed the Single Resolution Board, which adopted a resolution scheme entailing the sale of Banco Popular to Banco Santander."
The EU's Single Resolution Board said Banco Popular will continue to operate under "normal business conditions" as a solvent and liquid member of Santander Group.