The European Commission has formally challenged Spain over its actions to obstruct BBVA’s hostile takeover bid for rival Sabadell.
On Thursday, a letter of formal notice was issued to Madrid, initiating an infringement procedure, after the Spanish government last month declared that BBVA would not be allowed to merge its operations with Sabadell for at least three years as part of the terms attached to its 13-billion-euro offer. ALSO READ: Spanish government says BBVA must keep Sabadell separate for 3 years as takeover condition.
According to the letter, the Commission believes that certain provisions in Spanish banking and competition laws, which grant the government unfettered power to intervene in mergers and acquisitions, ‘interfere with the exclusive competencies of the European Central Bank and national regulators under EU banking laws’.
This communication follows a prior warning issued in May not to obstruct the bid. The Commission further stated that Spain’s extensive discretionary powers represent an unjustified limitation on the free movement of capital.
In response, Spain’s economy minister, Carlos Cuerpo (main image), told reporters that the country’s regulations fully comply with European standards and stressed that the infringement process does not suspend the government’s decision.
‘These are two parallel processes … and we believe that our legal and technical position will ultimately prevail, showing that both regulations align perfectly and that the government’s actions have been entirely appropriate,’ Cuerpo said.
While Spain cannot prevent BBVA from acquiring Sabadell’s shares, it does have the authority to decide whether or not the merger proceeds at a later stage. The government’s conditions, however, do not block the transaction itself.
BBVA has chosen to move forward with the bid, which is now awaiting approval from Spain’s stock market regulator. ALSO READ: BBVA to proceed with Sabadell takeover bid, despite government’s conditions.
Spain has two months to respond to the Commission’s concerns and address the issues raised. If Spain fails to provide an adequate response, the Commission may issue a reasoned opinion, urging compliance, and could ultimately refer Spain to the Court of Justice of the European Union.
Eurozone banking regulators have supported banking consolidation to strengthen the sector, but political leaders have been cautious, often prioritising job preservation and protecting domestic banks.
The Commission also stressed that consolidation is crucial for achieving a fully integrated banking union across the EU.
Subscribe to the Weekly Newsletter from Spain in English.
Click here to get your business activity or services listed on our DIRECTORY.