STOCKHOLM, Sept 21 (Reuters) - Swedish bank Handelsbanken said on Tuesday it proposed an extra "dividend-in-kind", consisting of shares in Industrivarden and corresponding to 4.42 crowns per share.

Investment company Industrivarden is Handelsbanken's biggest owner, with 11% of shares, according to Handelsbanken's website.

"The board of directors proposes an extra dividend of shares in Industrivarden corresponding, as of today, to a value of approximately 8.7 billion Swedish crowns ($1.00 billion), or 4.42 Swedish crowns per share in Handelsbanken," the bank said in a statement.

"The bank’s exposure to shares in the pension management is reduced through a dividend in the form of shares, which increases long-term stability in the bank’s capitalisation," it said, adding that the proposal came on the back of a good capital situation.

The bank said the shares were currently managed by the pension fund Handelsbankens Pensionsstiftelse but it would buy them before distributing to shareholders.

With the "dividend-in-kind", the bank estimated its common equity Tier 1 capital ratio, a measure of financial health, would fall to around 19.4% from 20.5%. ($1 = 8.6757 Swedish crowns)

(Reporting by Anna Ringstrom; Editing by Edmund Blair and Lisa Shumaker)