CARACAS, Venezuela (AP) - President Hugo Chavez's government assumed control of Venezuela's third-largest bank on Friday - making the state the largest player in the nation's banking system.

The purchase of the Spanish-owned Banco de Venezuela gives Chavez's socialist government control over more than one-fifth of bank deposits as he tightens his grip over the economy.

The acquisition will "strengthen the public banking system," which favors sectors including agriculture, energy, housing and tourism, Finance Minister Ali Rodriguez said in a statement.

In May, the Venezuelan government agreed to pay Spain's Grupo Santander $1.05 billion for the bank, ending months of stalled negotiations.

At the time, Banco de Venezuela had 3.2 million clients, 10 percent of the country's deposits and 6,000 employees.

Combined with other state banks, the government will now control about 21 percent of deposits and 16 percent of loans, a payroll of 15,000 employees and 651 bank branches.

The deal went into effect on Friday with an initial payment of $630 million. The rest will be paid in two equal installments in October and December.

Like the rest of the economy, Venezuela's banking sector is already highly regulated, with the government dictating interest rates and commissions.

Under Chavez, Venezuela has nationalized major players in the steel, electricity and other sectors, including four major oil projects, since 2007.

The Venezuelan consulting firm Ecoanalitica calculates those nationalizations have cost Chavez's government some $23 billion.