By Elena Vardon
The European Union began proceedings against Spain over its intervention in banking mergers after the government blocked the legal combination of BBVA and Sabadell for at least three years.
The European Commission, the EU's executive arm, said Thursday in a formal notice that Spanish laws that give Madrid authority to intervene in banking acquisitions undermine the exclusive competences of the European Central Bank and national supervisors, and restrict the fundamental EU freedoms of establishment and capital movements.
"We have received a communication from the European Commission regarding the initiation of an infringement procedure for an alleged misalignment of current Spanish regulations with European regulations," a spokesperson for Spain's economy ministry said, adding that these are laws that have been in force for years and have been applied on several occasions.
The legal warning comes after Spain imposed strict conditions on the proposed takeover by Banco Bilbao Vizcaya Argentaria--as the bank is formally known--of its smaller peer Sabadell last month on general-interest grounds other than competition. The government said it would clear the deal if the entities and assets of the two banks are kept separate and their activities are independently managed for a period of three years, which can be extended by a further two.
In a bid to bolster its presence in its home market and form one of Europe's largest banks, BBVA launched a takeover offer in May last year that valued Sabadell at roughly $12 billion at the time. The approach quickly turned hostile as it triggered fierce opposition from Sabadell's management as well as from government officials and union leaders, who have said a merger would harm competition, employment and financial inclusion.
The transaction has gotten the green light from the ECB and Spain's competition regulator. BBVA still intends to proceed with the tender offer to Sabadell shareholders despite the government's decision, which lessens the deal's attractiveness by delaying a full operational merger and the projected cost savings that come with it.
Spain now has two months to respond to the letter of formal notice and address the shortcomings raised by the Commission. The Spanish government will continue to cooperate constructively with the European institutions to explain and clarify any legal or technical differences, the spokesperson said.
Spain now has two months to respond to the letter of formal notice and address the issues raised by the Commission. Another warning, called a reasoned opinion, could be issued if the response isn't satisfactory, and the case could further escalate to the EU's court of justice for an alleged breach of the bloc's law.
Write to Elena Vardon at elena.vardon@wsj.com
(END) Dow Jones Newswires
07-17-25 0842ET
