The ECB encourages the merger of BBVA and Sabadell in its coverage of making European champions | Economy | EUROtoday

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Luis de Guindos
The vp of the European Central Bank (ECB), Luis de Guindos, in an archive picture.WOLFGANG RATTAY (REUTERS)

BBVA hopes to have the favor of the European Central Bank (ECB) in its try to purchase Sabadell. The supervisor has been encouraging these processes in his goal of getting solvent entities. “We do not comment on individual transactions, but we have a clear vision about consolidation,” official sources from the group say, whereas referring to statements from its members by which they make it clear that it’s important to advertise the scale of the entities to achieve scale. world. Is the case. The transaction would make the merged financial institution the tenth largest European financial institution by belongings, which might enhance its place to face up to a disaster.

Along these traces, the president of BBVA, Carlos Torres Vila, confirmed his confidence in having the approval of the ECB, which might imply help for his undertaking. “In the first interactions with the supervisors there is no obstacle from their point of view, they even have a favorable opinion of consolidation with the consideration of the entities acquiring scale. The ECB likes consolidation and would love to see cross-border consolidation. It does not apply to this transaction, but their opinion is on the favorable side and they have been informed,” he defined this Thursday in his look to clarify the initiative.

The financial institution has began an impediment course to take over the Catalan entity. First, you will need to persuade shareholders handy over their securities. And if it succeeds, it then faces intensive scrutiny by supervisory and regulatory authorities that should approve the merger. Among all of them, the financial institution hopes to acquire the inexperienced gentle from the European regulator.

The ECB's most important mission is to make sure the monetary stability of the European Union. And for this objective, it seeks to make sure that entities have excessive ranges of solvency to face up to a disaster. Financial sources clarify that the regulator's imaginative and prescient is favorable to banking focus with the goal of making European champions which are too huge to fail within the face of an unfavorable financial cycle. In reality, the regulators themselves have publicly expressed their want for cross-border merger operations to be carried out between banks from two totally different international locations, with the goal of making European entities that achieve scale and may compete with the biggest worldwide banks.

BBVA estimates that the ECB's approval of the operation could be based mostly on solvency and stability standards. The new entity would have excessive ranges of solvency, above the financial institution's personal 12% goal. The forecast is that the operation will devour simply 30 foundation factors of capital (about 1,450 million, whereas BBVA presently has extra capital of three,100 million). “We have to be absolutely prudent, at this moment we do not know if the operation will materialize, it depends on the shareholders. But the ECB has to authorize it and always does so based on the principle of solvency and the prudential principle. What we are looking for is the stability of the financial system in the euro zone and Spain is an important country,” stated the vp of the ECB, Luis de Guindos, yesterday.

Beyond having the approval of the ECB, BBVA should receive approval from the Bank of Spain, the National Securities Market Commission (CNMV), the Ministry of Economy and the National Commission of Markets and Competition (CNMC). ). And exactly the authorities are specializing in the implications that the operation would entail when it comes to lowering banking competitors. “It is a good time to pay attention to what the optimal level of concentration is. I don't have an answer today, but I think it is important to analyze it,” stated the governor of the Bank of Spain, Pablo Hernández de Cos, on Tuesday throughout his speech within the Congress of Deputies.

According to BBVA calculations, the merged entity would have a 22% market share in loans. The high three banks within the Spanish market would focus greater than 70% of the enterprise. And that’s the place the Government and the authorities are placing the magnifying glass. “The operation introduces potential harmful effects on the Spanish financial system. It would mean an increase in the level of concentration that could have a negative impact on employment and the provision of financial services,” say official sources from the Ministry of Economy.

BBVA has an asset. Although the ensuing entity would considerably achieve market share, it could not be the main financial institution within the Spanish market. That title has been held by CaixaBank because it absorbed Bankia. And the entity led by Carlos Torres understands that if the authorities agreed to this merger 4 years in the past, making a dominant entity in all enterprise segments with shares better than 20% and 25%, they need to not put obstacles in the best way of a financial institution that will stay in a second place available in the market. “To analyze this operation we have had legal advisors who have analyzed precedents and the CNMC criteria. From all this analysis, the conclusion is that with the resulting concentration we would reach moderate quotas, lower in almost all areas than CaixaBank,” Torres defined yesterday.

In earlier operations, the CNMC analyzed the degrees of market share that the ensuing entity would accumulate in all of the enterprise segments by which it operates. And additionally when it comes to workplaces, since they’re one of many most important distribution channels. According to the info on branches supplied by the Bank of Spain, BBVA is the one entity with a banking workplace in 30 postal codes and Sabadell in 18. But past the degrees of focus, BBVA defends that banking competitors in Spain is broader, since normally all entities will let you create an account on-line or contract their services by way of the app cellphones or net pages. In current years, digital banks, international entities and fintech They have added to the supply that conventional banking already supplied.

“The market is characterized by digital competition. Last year, more than half of the clients who opened their accounts at BBVA did so through the digital channel. And it is the same trend in other banks. There is a different type of competition and these factors will be taken into account by the CNMC. Everything indicates that the operation should not have a major competition problem,” Torres insisted.

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