Analysts welcomed the deal, but expressed surprise at its timing. With pounds 2bn invested in Latin America between them and substantial overlap between operations there, both banks' shares have been pummelled by the Brazilian crisis.
The deal nevertheless creates a powerful Spanish banking force with strong relationships abroad. Santander is the biggest shareholder in Britain's Royal Bank of Scotland, with almost 10 per cent. It also has more than 5 per cent of San Paolo-IMI, one of Italy's biggest banks and is believed to be seeking a stake in CCF, the French bank.
Central Hispano has strong ties with Portugal's BCP and Commerzbank of Germany. It also has a large portfolio of industrial holdings in some of Spain's biggest companies.
"The fact that there will be just four banks of any size in a country of 40 million people points an interesting finger at the UK," said one City investment banker yesterday.
The enlarged bank will be run by the two existing bosses, Emilio Botin and Jose Maria Amusategui, until 2002.
Shares in Banco Bilbao Viscaya, Spain's next-largest bank soared in anticipation of it too being forced to merge.