By Jesús Aguado
MADRID (Reuters) -The European Commission officially challenged the Spanish government on Thursday over its attempts to hinder Spanish bank BBVA’s hostile bid for smaller rival Sabadell.
A letter of formal notice, which opens an infringement procedure, was sent to Madrid after the government last month said BBVA would not be allowed to integrate its operations with Sabadell for at least three years as one of the conditions imposed on the more than 13 billion-euro ($15.05 billion) offer.
The letter said that, in the Commission’s view, provisions in Spanish banking and competition laws granting the government unrestricted powers to intervene in mergers and acquisitions “impinge on the exclusive competences of the European Central Bank and national supervisors under the EU banking regulations”.
The Commission’s letter, which comes after a warning in May not to hinder the bid, also said that it considered Madrid’s broad discretionary powers as unjustified restrictions on the freedom of capital movement.
Spain’s economy minister Carlos Cuerpo told journalists that domestic regulations were fully aligned with those in Europe and that the start of the infringement procedure did not suspend the cabinet’s decision.
“These are two parallel processes…and we hope that in the end our legal and technical position will prevail, namely that these two regulations are perfectly aligned and that the government’s actions have been entirely appropriate,” Cuerpo said.
The conditions set by Madrid did not block the transaction. Under Spanish law, the government cannot stop BBVA from buying Sabadell’s shares, but it has the final word at a later stage on whether a merger goes ahead.
BBVA decided to proceed with its bid despite the conditions and the deal is now waiting for approval from Spain’s stock market supervisor.
Spain has now two months to respond and address the shortcomings raised by the Commission.
In the absence of a satisfactory response, Brussels may decide to issue a reasoned opinion and urge Spain to comply and could ultimately refer Spain to the Court of Justice of the European Union.
Euro zone banking supervisors have called for banking consolidation to strengthen the sector, but deals have been scarce as politicians have sought to preserve jobs and protect home-grown lenders.
The Commission also said consolidation was essential for achieving a bloc-wide banking union.
BBVA and Sabadell declined to comment on the European Commission’s move.
($1 = 0.8639 euros)
(Reporting by Jesús Aguado; additional reporting by Bart Meijer in Brussels and David Latona and Emma Pinedo in Madrid; editing by Andrei Khalip, Kirsten Donovan)
