BRUSSELS—The European Union has opened an in-depth investigation into Portugal's €1.1 billion restructuring of local lender Banif, saying that the state subsidies may have violated EU competition rules.

Portugal's government injected €1.1 billion of fresh capital into Banif in January 2013 to allow it to meet minimum capital thresholds imposed by the banking regulator.

The government subsequently submitted a restructuring plan for Banif, which was amended several times, most recently in October 2014.

The European Commission, the bloc's top antitrust regulator, said Friday that the restructuring plan might have breached EU rules, which require that the bank and its owners contribute sufficiently to the cost of its restructuring, and limit distortions to competition.

"The final restructuring plan for Banif should ensure that the bank becomes viable long-term whilst limiting distortions of competition brought about by the state support," the commission said in a statement.

The EU will now seek feedback from the parties involved before coming to a final decision. If the regulator decides that Portugal did breach EU competition rules, it could require the government to recover all or part of the €1.1 billion of state support.

It said the decision to open a formal investigation didn't prejudge its outcome.

The Portuguese Finance Ministry said in a statement that the commission's probe, which it called "procedural," doesn't have any impact on Banif's financial situation, and it doesn't affect the recapitalization plan currently under way.

"The Portuguese authorities are following the process, in straight collaboration with the European Commission, in order to make the necessary clarifications to the commission and assure the compatibility of the help given to Banif with the rules of state support," the ministry said.

Banif acknowledged the investigation in a statement.

Write to Tom Fairless at tom.fairless@wsj.com

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