On 9 May 2024, the Spanish bank BBVA publicly announced the acquisition of sole control of another Spanish bank, Banco Sabadell, through a takeover bid (TOB), which was notified to the National Competition Authority (CNMC) on the 31^st of the same month. 

Clearance of this merger would involve the consolidation of two major players in the financial sector in Spain, and would foreseeably affect several markets, including retail banking, asset management, insurance, and payment services. 

CNMC's conclusions reached during the Phase I review

In Phase I of the merger proceedings, the CNMC conducted a thorough investigation of the competitive situation in the affected markets and the commitments offered by BBVA, which remain confidential. As a conclusion of its investigation, the CNMC has identified certain competition concerns, particularly considering that, if approved, the acquisition would result in a financial market with only three banks controlling approximately 70% of Spain’s lending and deposit markets, which may be perceived as a threat to reduction of consumer choices and price increases. 

Effects on certain regions have also been the object of CNMC's analysis, as there might be a risk that the combined entity could hold a powerful market position in rural areas, which might lead to reduced accessibility and unfavorable conditions for consumers and small and medium-sized businesses (e.g., less advantageous credit terms in certain regions).

Formal opening of Phase II and next steps

Based on Article 57.2(c) of the Spanish Competition Act and the associated competitive concerns identified during Phase I, on 12 November 2024, the CNMC decided to formally open a Phase II investigation aiming to deepen its examination of the transaction, particularly regarding the maintenance of effective competition in the market.

According to the Spanish antitrust watchdog, the investigation conducted during Phase I lays the groundwork for a more efficient analysis in the next phase. The CNMC has announced that it will request mandatory reports from the Autonomous Communities where the concentration is expected to have a more significant impact, and third parties with a legitimate interest will be able to submit their opinion on the transaction, including, inter alia, competitors and consumer associations. 

The CNMC's final decision may either involve the unconditional approval of the merger, the imposition of commitments for its implementation or, if competition problems cannot be overcome, the prohibition of the transaction. Phase II review will also allow the intervention of the Spanish Ministry of Economy in the authorization of the transaction, which will have a say to uphold or amend the conditions imposed by the CNMC whether the transaction is approved.

Within this context, BBVA has asserted its right to withdraw from the transaction if the TOB fails to maintain value creation, primarily driven by concerns over prolonged timelines for merger control clearance and the anticipation of stricter conditions being imposed. 

In parallel to the national procedure, the merger has also been notified to the European Commission for scrutiny under Regulation (EU) 2022/2560 of the European Parliament and of the Council of 14 December 2022 on foreign subsidies distorting the internal market, which will have until 26 November to issue its own decision (Case FS.100095).

General overview of the financial sector in Spain

Spanish precedents have shown relatively soft approval in Phase I review for merger transactions in the banking industry, as was the case in the Caixabank/Bankia transaction in 2021, where two other major Spanish banks merged into one single operator, also having a significant impact on the retail banking sector in Spain. During CNMC’s merger control proceedings, Caixabank proposed some commitments, addressing issues such as support for vulnerable clients, client communication, maintaining physical branch presence, and commercial relationships, particularly in areas where market concentration was expected to increase post-acquisition. The CNMC considered these commitments to be sufficient to grant clearance of the transaction without the need to open Phase II, with a resulting entity that now accounts for approx. 25% of the deposits and lending markets in Spain.

However, the banking industry is increasingly facing regulatory challenges, particularly focusing on the potential effects on the banking and payment services markets, reflecting the changing landscape of competition enforcement in the Spanish financial sector, which is inevitably leaning towards growing concentration. Therefore, a stricter and more cautious approach may be followed in this case.

As the process unfolds, the outcome of the CNMC’s investigation will shed some light on its position regarding financial markets, and how to find a balance between fostering consolidation for market stability by creating stronger competitors and safeguarding effective competition and consumer welfare.

If you need more information or further guidance in this area, please contact Candela Sotés.

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