Ben Pawlowski
The European Union has cautioned the Spanish government against blocking the controversial proposed €11 billion mega-merger of two of the country’s largest banks.
Spain’s economy minister, Carlos Cuerpo, announced on Tuesday that BBVA’s hostile takeover bid of rival Catalunya-based lender Banco Sabadell would be subject to a full review by cabinet ministers in a move likely to further delay the tie-up.
The cabinet will have 30 days to decide whether there are reasons other than competition issues to impose further conditions or restrictions on the merger.
However, the deal has already been approved by the European Central Bank and the Spanish competition authority, the CNMC, with several provisions in place to protect customers.
If completed, BBVA-Sabadell would become the country’s second largest bank behind CaixaBank, leapfrogging rivals Santander.
But the move has been subject to hostility, particularly from Spain’s socialist-led government, the Catalan business community and Sabadell’s board who fear the takeover would have a negative impact on customers and local businesses.
Cuerpo, speaking earlier this week, pointed to issues such as ‘job protection, financial inclusion and territorial cohesion’, the latter referring to Sabadell’s importance in the regional economies of Catalunya and Valencia.
He has also previously raised concerns that the move would leave Spain with just three large banks, leaving the country prone to financial instability.
“If green lights are given on both those fronts [ECB and CNMC], then – in the single market and even more so in the Banking Union – there is no basis to stop an operation based on a discretionary decision by a member state government,” said Olof Gill, a spokesperson for the European Commission.
Gill added that ‘banking sector consolidation – especially on a cross-border basis – will help to create a stronger, more integrated EU Banking Union, which is a vital pillar for building Europe’s future competitiveness’.
In a statement, Basque-based BBVA said ‘the transaction serves the general interest of Catalunya, Spain and Europe’.
It added: “BBVA has taken on unprecedented remedies in the Spanish financial sector, which makes the transaction even better for households, the self-employed, SMEs [Small and Medium-sized Enterprises] and corporates.”
Sabadell said: “Banco Sabadell remains focused on maximising value creation. We have a solid and credible long-term plan, with a presence in stable markets, and we are fully confident that our standalone strategy will deliver greater and more sustainable shareholder returns, while allowing our clients to benefit from a higher quality of service.”
In the coming days, the Spanish government will release the findings of a rare public consultation announced by prime minister Pedro Sanchez earlier this month.
The government will not have the power to block the merger unless Sabadell’s shareholders refuse to accept the hostile takeover bid, in which case Madrid could veto the deal.
