Portugal has confirmed that it will provide a far-reaching restructuring plan for Banif by 31 March 2013, for approval by the commission.
The regulators will finally give their approval for capital injection after the assessment of the restructuring measures, which will be submitted by Portugal.
Commission competition policy vice president in charge Joaquín Almunia said, "The €1.1 billion recapitalisation allows Banif to meet regulatory capital ratios."
"Now, Portugal urgently needs to work out an in-depth restructuring plan, refocusing the bank on its core activities in Madeira and the Azores and leading to a significant downsizing of its operations."
The government issued a recapitalization plan on 11 January 2013, which comprises a subscription of shares issued by Banif of €700m and in hybrid securities in the amount of €400m, to avoid violation of capital regulation of the Portuguese banking regulator.
The commission found that options taken by the government were well-targeted, limited to the minimum necessary and contained sufficient safeguards to curb competition distortions.
Banif is one of the largest commercial bank in Portugal with regional presence in Azores and Madeira. It had total assets of €15.8bn, at the end of 2011.
