Santander to Sell 7.8% Stake in Chile Unit

Spanish bank Santander will sell a 7.8 percent stake in Santander Chile to help meet capital requirements amid Europe's spreading crisis, the Chilean affiliate said in a statement, sending the local unit's shares tumbling.

Spain's Santander aims to boost its core capital to 10 percent by June 30, Santander Chile said in a statement issued in New York overnight. Chilean media estimated the stake sale could raise just over $1 billion.

Shares in Santander Chile fell over 5.67 percent in early trade, fast outpacing a slim 0.07 percent loss on the wider Chilean blue chip share index

While global regulators are asking banks to hold a minimum of 7 percent capital from 2013, the European Banking Authority has insisted that European banks go a step further and bolster their core Tier 1 capital ratio to 9 percent by mid-2012.

European governments want to make sure that banks in their region can cope with another round of writedowns of European debt amid euro zone financial turbulence, as the institutions in Europe are by far the biggest creditors of euro governments.