The enabling law, expected to be approved this week or next, will allow the Bank of Spain to take charge even at banks that meet liquidity and solvency requirements, if it is "foreseeable" they could fail to meet the rules in future, leading newspaper El Pais said, citing a draft document from the Economy Ministry.

A spokeswoman for the ministry was not immediately available for comment.

Spain recently accepted a 100 billion euro ($124.67 billion) rescue for its ailing banking sector. The state rescued troubled Bankia (BKIA.MC) in May and is currently carrying out a bank-by-bank stress test of its lenders.

The Bank of Spain will have a range of powers to bring banks to heel, El Pais said, and will be able to demand banks make plans to guarantee their viability in 10 days and formulate debt restructuring agreements with their creditors.

The central bank will also be able to remove top officials from their posts at struggling entities, the newspaper said.

Any action by the Bank of Spain must be approved by the bank rescue fund, known as FROB, which would receive quarterly compliance reports. The FROB will be placed under the direct supervision of the Economy Ministry.

After the first phase of help from the central bank, the FROB will take charge of the restructuring and "orderly resolution" of banks.

The bank fund would be able to wind down any banks not able to return public aid in "a reasonable time", according to the draft document. It would determine the value of the bank and transfer assets or liabilities to a "bridge bank", which would be sold.

The FROB would have the options of directly injecting cash into a bank, or transferring debt securities from the Treasury, itself or the European rescue fund, El Pais said.

If banks receive aid from the FROB, shareholders and creditors must be the first to take losses, the newspaper said, citing the draft document. ($1 = 0.8021 euros)

(Reporting by Clare Kane; Editing by Julien Toyer/Jeremy Gaunt)

• A Permanent Economic Emergency