Independence of the ECB and CNMC is key to BBVA’s takeover bid for Sabadell

A few years ago Iberdrola chaired by Inigo of Oriol And Endesa chaired by Villa Rodolfo Martin They agreed to join together to create the first national electric power company. These were the times of government Jose Maria Aznar And Rodrigo Rato as vice presidenteconomic organization. The executive branch vetoed the operation, arguing that “four is better than three”, referring to the fact that the merger will mean that there will be only three players in the national electricity sector. The same thing could happen now, but in the financial sector.

The way the then government prevented the merger of two electric companieswho soon changed presidents, precisely through imposing conditions (they would have to divest a large amount of assets) that were considered not to allow the operation to proceed.

BBVA hostile takeover (Sabadell’s board of directors rejected this proposal. when it was submitted, and must meet again for its ratification) must pass the filter of the supervisory authorities of the ECB, Great Britain and the National Commission for Markets and Competition (CNMC)which will have to analyze it from the point of view of financial stability and guarantee competition in the financial sector.

All this once The National Securities Market Commission is registering the takeover prospectus, which BBVA is expected to submit in the coming weeks.

Analysis

Governor of the Bank of Spain Pablo Hernandez de Cosstated in this sense that the ECB supervisory authorities should analyze operations of this type that appear whether this benefits or harms the solvency of the resulting organizationalso putting some reservations regarding the size of organizations as the final goal to be pursued.

Regarding possible competition problems, the governor, without commenting on a specific operation, indicated that In Spain, the degree of concentration of banking activities is higher than in the rest of the EU countries, with the exception of the Netherlands.

CNMC President Cani Fernandezhas already explained that when presenting an operation, the institution that presides I will analyze it exhaustively, using the example of what was done in previous CaixaBank’s transactions with Bankia and Unicaja’s with Liberbank.

Both transactions were approved at that time.after the enterprises have acquired voluntary commitments to be present in certain municipalities and on specific aspects of certain financial products and services.

The proposed operation aims to create the second largest bank in Spain.; A best balance sheet BBVAnow very focusing on developing countries (Mexico and Türkiye), with increasing presence in Spain and entry into the UKAnd entry into business, company businesswhere it has a limited presence, quite far from competitors.

Concentration and protection of competition They will be the basis for decisions of supervisory authorities.

In terms of retail banking, while it is true that there is already a high degree of concentration, which will increase if the merger of BBVA and Sabadell is carried out, There may not be too many problems, not only because of the presence of the other two large banks, but also because other smaller banks have corresponding shares of business in their areas of influence.. In addition, it must be taken into account that digitization allows you to search for alternative offers of goods and services from these entities or from other existing ones.

Companies

A more relevant answer takes place in business company, because there are much fewer real players there. According to experts, missing Popular many years ago, Sabadell pays the most attention to this segment, followed by CaixaBank and Santander.the latter is at a greater distance.

The concern is under what guarantees can one declare that the new bank, if the operation is formalized, It will maintain this business culture, otherwise it will be dissolved into a single group. The employers’ associations of Catalonia and Valencia have already expressed their disagreement.

What’s surprising is strong opposition expressed by the Ministry of Economy, who believes that the operation would mean increased concentration, which “could have a negative impact on employment and the provision of financial services”in addition to indicating potential financial stability issues that could impact “territorial cohesion” thanks to the presence of two banks throughout the geography.

playground

It seems that this is precisely the situation in which BBVA should try to acquire Sabadell. Anyway, there will be shareholders who are very dispersed for both individual and institutional holders which will have the final say after the CNMV registers the transaction prospectus.

The role played by the ECB and the Bank of Spain as an integral part of the Eurosystem, as well as the CNMC, in the analysis of supply is crucial.. The independence of both institutions, demonstrated on many occasions, guarantees that if the figures presented make economic and financial sense and competition in the market is guaranteed, with restrictions considered necessary, the final say will remain with the Sabadell shareholders.