Banco Popular was bailed out by Santander in early June, and could cost the latter around $7.8 billion.

The president of Spain’s market regulator has said it is investigating if there is proof of insider trading in Banco Popular prior to its bailout by Santander.

Sebastian Abella, president of the CNMV (National Stock Market Commission) told financial newspaper Expansion that the regulator will investigate the days prior to Santander’s takeover of Banco Popular.

Santander will have to pay around €7 billion ($7.8 billion) to purchase Banco Popular, which was around €2 billion more than analysts had anticipated. This was after Banco Popular was described by the European Central Bank as “failing or likely to fail” due to its diminishing cash reserves.

"We will investigate if, in the days before the intervention in Banco Popular, there was privileged use of information and manipulations in the stock market," Albella said.

Popular’s share prices dropped almost 60 per cent in its last month of trading in the lead up to Santander's acquisition on 7 June.