Banco Santander said on Tuesday that Italian banker Andrea Orcel would not take over as chief executive after it could not meet his pay expectations, in a rare and unusual move for a top bank.

Jose Antonio Alvarez will now stay on as CEO instead of Orcel, who previously worked for Swiss bank UBS and was appointed to the role at Spain's largest bank in September.

"The cost to Santander of compensating Mr Orcel for the deferred awards he has earned over the past seven years, and other benefits previously awarded to him, would be a sum significantly above the board's original expectations at the time of the appointment," Santander said in a statement.

Santander, also the euro zones largest bank by market value, said at the time of Orcel's appointment in September that it would be effective in early 2019 following regulatory approvals.

"The Board of Santander had agreed the terms of his annual remuneration in his future role at Santander, which were in line with that of Jose Antonio Alvarez," Santander said on Tuesday.

"It was not, however, possible, to determine in advance the final cost of the Group's share of compensating Mr Orcel for the remuneration awards, made to him by his previous employer, that would have been foregone."

Santander did not mention any figures and did not say how big the pay gap was.

Orcel did not immediately return requests for comment.

Orcel worked at Bank of America Merrill Lynch between 1992 and 2012. Both Bank of America/Merrill Lynch and UBS have advised Santander on many corporate moves.

Santander also said that Rodrigo Echenique, due to retire from his current role as chairman of Santander Spain in March, would remain until a successor is named.

UBS declined to comment.