The European Commission has issued a formal warning to the Italian government over its ‘golden powers’ legislation, raising concerns that the rules over some takeover deals in the banking sector could breach EU law.

This warning regarding Italy’s use of “golden powers” comes as Brussels moves to discourage member states from blocking mergers and consolidation within the banking sector.

Reuters reported that Italy’s “golden powers” enable the government to protect national interests in strategic sectors like defense and telecommunications, and these regulations have also been extended to the banking industry.

The Commission stated, “The Commission has raised concerns over the so-called ‘Golden Powers’ legislation, which grants the Italian government broad prerogatives to review, block or impose conditions on corporate transactions in the banking sector.”

UniCredit, a leading Italian bank, has cited government intervention as the reason for abandoning a takeover bid for smaller lender Banco BPM.

 The Italian government now has two months to respond to the Commission’s concerns and address the identified shortcomings.

On 21 November, Italy’s Economy Minister Giancarlo Giorgetti said Rome would respond to the EU’s objections in the appropriate forums and would draft a legislative proposal to clarify the situation and address the objections.

He stated, “We are convinced that this will enable us to establish a shared framework of competences.”

The media outlet had reported in October that Italy is prepared to make some changes to its golden power rules, but does not intend to drastically alter them.

The Italian government’s main objective remains the preservation of the principle, which has been confirmed by some Italian court rulings, that the government can defend its national interest in business matters.

European Commission spokesperson Arianna Podesta clarified that last Friday’s announcement pertains to the Golden Power legislation in general, rather than to any particular case.

The news agency reported that in a different procedure, the EU was preparing to instruct Italy to revoke a government decree that had set conditions on UniCredit’s takeover offer for Banco BPM.

Among the other requirements, Italy told UniCredit to stop activities in Russia by early next year.

Podesta added, “Article 21 of the merger regulation procedures is separate, and there we have not taken any decision.”