Banco Santander has announced that it will spend €1 to become the biggest bank in Spain.

The nominal, symbolic fee went on its acquisiton of struggling rival Banco Popular Espanol, which had just been issued with a dire European Central Bank warning.

On Wednesday morning, the ECB announced that Popular was facing a credit crunch it would not survive, as its liquidity situation fell to dangerous levels.

Popular shares had more than halved in 2017, with the bank still struggling to deal with the €37bn weight of bad loans resulting from the 2008 financial crisis. A withdrawal of deposits finally triggered the sale.

Santander will also carry out a capital increase of roughly €7.9bn, which it said would be used to "cover the capital and provisions required to strengthen Popular's balance sheet."

Picture by: Manu Fernandez/AP/Press Association Images

The move marks the first use of such a scheme to deal with a failing bank post-crisis.

The ECB statement read:

"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."

Elke König, chair of the Single Resolution Board which winds down banks, said:

"The decision taken today safeguards the depositors and critical functions of Banco Popular."

Spanish economy minister Luis de Guindos also commented that the takeover was a good outcome for Popular and the taxpayer.

It also leaves Santander with a 25% share of the lucrative Spanish market for small and medium-sized company loan portfolios.

Speaking to Bloomberg TV, Santander chairperson Ana Botin insisted she had felt "absolutely no pressure" from regulators to rescue Popular, noting:

"This is a transaction that is very good for our franchise in Spain and Portugal. It creates the best bank in both markets.

"This is really great news for Europe, for the financial system, for Spain, and for Santander's shareholders."