CARACAS, Venezuela - President Hugo Chavez's governmentassumed 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 givesChavez's government control over more than one-fifth of bankdeposits as he tightens his grip over the economy.

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

In May, the Venezuelan government agreed to pay Spain's GrupoSantander $1.05 billion for the bank -- ending months of stallednegotiations.

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

Venezuelan President Hugo Chavez is seen here speaking during the Bolivarian Alternative for the Americas (ALBA) Summit. Photo Credit: AFP Photo

Under Chavez, Venezuela has nationalized major players in thesteel, electricity and telecommunications sectors, as well as fourmajor oil projects, since 2007.