Banco Santander SA (SAN.MC) has pulled out of talks to buy Royal Bank of Scotland Group's (RBS.L) Williams & Glyn unit, a source with direct knowledge of the matter said on Wednesday, because of a disagreement over the price.
Santander had made an offer to buy the unit last month, sources previously told Reuters, as the British lender seeks an end to a costly seven-year process to offload Williams and Glyn.
Spokespeople for Santander and RBS declined to comment.
RBS has sought to offload the small business lender as a key European Union condition of its taxpayer-funded rescue at the peak of the 2007-08 global financial crisis.
Santander walked away from a deal to buy Williams & Glyn fours years ago amid concerns about its technology platform, three sources with direct knowledge of the matter told Reuters earlier this year.
Some investors and legal experts have said the government could scrap the obligation to sell W&G entirely following Britain's vote in June to leave the EU, as the UK would no longer be bound by the EU's state aid regime.
RBS executives and EU officials, however, have said RBS remains fully committed to selling.
European regulators originally ordered a sale of W&G by 2013 to prevent RBS, Britain's largest small-business lender and responsible for 1 in 4 loans in the sector, from having an unfair advantage and posing a systemic threat to its economy.
The Financial Times first reported Santander's pull-out on Tuesday.
(Reporting by Lawrence White in London, Jesus Aguado in Madrid and Abinaya Vijayaraghavan in Bengaluru; editing by Susan Thomas/Mark Heinrich)