Banco Santander has said 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 U-turn on such a high-level appointment. 

Jose Antonio Alvarez will now stay on as CEO instead of Orcel, who had 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 did not mention any figures and did not say how big the pay gap was. 

But three sources with knowledge of the matter told Reuters the deferred payment amounted to €50m or more. 

One of the sources also said there were issues about Orcel's start date and non-competition clauses. 

Santander, also the euro zone’s 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. 

"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." 

Orcel did not immediately return requests for comment. 

He is on gardening leave and is technically still an employee of UBS until the end of a six-month notice period. 

He had been head of UBS Group's investment banking business since 2014 and a member of the bank's executive board since 2012. 

"This is a matter between Andrea Orcel and Santander. UBS applied the compensation plan rules relevant in such cases and made them transparent to all parties before any decisions were made," UBS said. 

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.