The European Commission has warned the Spanish government against imposing undue obstacles to BBVA’s €11bn hostile takeover bid for Banco Sabadell, stating that Madrid lacks the authority to block the deal on discretionary grounds.  

The warning follows Spain’s decision to subject the bid to a 30-day cabinet review, a move that could delay or impose conditions on the year-long effort to merge two of Spain’s largest banks. 

Spain’s economy minister, Carlos Cuerpo, recently said that the cabinet would examine the deal for reasons beyond competition concerns, citing “job protection, financial inclusion and territorial cohesion,” particularly in Catalonia and Valencia, where Sabadell has significant operations, according to the Financial Times.  

A government statement also highlighted potential impacts on “research and technological development, and social policy objectives.” Cuerpo said, “We are fully respectful of the procedure, the deadlines, and the involvement of the various institutions that are part of this process,” as reported by Reuters.  

The decision was backed by five other ministries with stakes in economic policy, the Financial Times noted. 

The European Commission argues that such a review contravenes EU principles.  

Olof Gill, the Commission’s spokesperson for financial services, stated, “If green lights are given on both [prudential and competition] fronts, then — in the single market and even more so in the Banking Union — there is no basis to stop an operation based on a discretionary decision by a Member State government,” as reported by the Financial Times and Bloomberg.  

Gill added, “It is important that banking sector consolidation can take place without undue or inappropriate obstacles being imposed.”  

He further noted, “Banking sector consolidation — especially on a cross-border basis — will help to create a stronger, more integrated EU Banking Union.” 

An EU official, speaking anonymously to Bloomberg, said the Commission is seeking more information from Madrid and may use its powers to ensure compliance with EU law. 

The bid has been approved by the European Central Bank and Spain’s competition regulator, the CNMC, which authorised the takeover earlier this month with conditions, including BBVA’s commitment to limit branch closures and maintain capital lines for small and medium-sized enterprises.  

Despite these approvals, Spain’s Socialist-led government has opposed the deal, labelling it “hostile”.  

While the government cannot prevent BBVA from purchasing Sabadell’s shares, it can veto a legal merger, potentially limiting integration. 

BBVA, chaired by Carlos Torres, was quoted by Financial Times as saying: “The transaction serves the general interest of Catalonia, Spain and Europe. BBVA has taken on unprecedented remedies in the Spanish financial sector, which makes the transaction even better for households, the self-employed, SMEs and corporates.” 

Sabadell, however, remains opposed, with its board rejecting BBVA’s initial friendly approach in May 2024.  

Sabadell has also explored a potential combination with a smaller peer to counter the bid, according to Bloomberg.