Banco Madrid will enter insolvency proceedings and suspend all activity, after significant deposit withdrawals, the country's central bank announced in a statement on Monday.
The news came days after the entire board of Banco Madrid resigned and handed management over to the Bank of Spain on Thursday, March 12th.
The change of management came after the central bank launched an investigation into accounts at the lender for suspected money laundering activities.
This came about after legal action was taken by US law enforcement authorites on Tuesday against the parent company of Banco Madrid, Banca Privada de Andorra (BPA).
"This decision comes in response to the sharp deterioration of Banco Madrid's financial situation as a consequence of the important withdrawals from client funds after the latest events which have affected its capacity to meet its obligations," Banco de España said in a statement, released on Monday morning.
Deposits were protected by the Spanish deposit guarantee fund of up to €100,000 ($105,350) per client, the bank said.