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The European Commission has sent Spain a legal warning over its move to block a banking merger between BBVA and Banco Sabadell, a deal that would create one of the region’s largest lenders.
In a letter of formal notice sent on Thursday, the commission asked the Spanish government to review its decision to prevent the banks from combining for at least three years.
It also demanded that Spain change or drop laws that gave Madrid wide powers to intervene in bank mergers, arguing that these contravened EU rules on freedom of movement of capital.
The letter is a first step in proceedings that have the potential to drag on for years and lead to Brussels referring Spain to the European Court of Justice for an alleged breach of EU law. Spain has two months to reply.
The Spanish economy ministry said that the laws in question “have been in force for several years and have been applied on several occasions”. It added that it would respond to the commission within two months and “continue to co-operate constructively with the European institutions to explain and clarify any legal or technical differences”.
The EU and member states have long talked about building a European banking champion that can rival larger US lenders, but there has been stiff opposition from national governments seeking to protect their own interests.
Senior European policymakers have said national governments have been hypocritical by taking a protectionist approach to mergers while at the same time calling for European integration and a banking union.
BBVA’s hostile bid for Sabadell and UniCredit’s move on Germany’s Commerzbank last year fuelled optimism about long-awaited consolidation in the European banking sector. But both have struggled to win support from politicians despite the potential transactions being looked upon favourably by the EU.
Several senior European bankers have pointed to former Italian premier Mario Draghi’s report on European competitiveness to advocate for mergers and speeding up the integration of capital markets across the region.
Spain’s government last month blocked BBVA’s hostile takeover of rival lender Sabadell for at least three years, imposing conditions on the would-be acquirer that the government’s political opponents say are intended to scupper the deal.
BBVA chair Carlos Torres Vila has said the bank will go ahead with its tender offer to Sabadell shareholders in the coming weeks despite the decision.
Brussels is taking issue with the fact the Spanish government is blocking the deal despite approval from the country’s competition authority, a move it claims contravenes the bloc’s banking regulations as well as rules on the free movement of capital.
The commission said on Thursday that Spain’s laws giving ministers power to intervene in mergers “impinge on the exclusive competences of the European Central Bank and national supervisors under the EU banking regulations”.
It added that the powers also constituted “unjustified restrictions to the freedom of establishment and of capital movements”.
Spain has pushed back on criticism of its intervention on the basis that it is up to the government “to determine whether there is any general interest that must also be protected”.
Carlos Cuerpo, Spain’s economy minister, told Capital Radio last week, that the government is “fully convinced that our regulations . . . are perfectly aligned with European regulations”.