EU Challenges Spain Over BBVA-Sabadell Deal Restrictions

According to Bloomberg, the European Commission has issued a legal warning to Madrid over specific conditions Spain imposed on the deal, which EU officials say breach single market regulations that guarantee the free movement of capital across member states—except under narrowly defined exceptional circumstances.

The Commission highlighted a requirement that BBVA and Sabadell remain legally and operationally separate for three years as an unjustified restriction. In a letter obtained by Bloomberg, the Commission argued that such measures do not appear to fulfill legitimate public interest or security concerns already covered by broader EU legislation.

Per Bloomberg, Brussels has urged the Spanish government to revise its national laws, stressing that authorities should only be able to intervene in bank mergers when there is a genuine threat to essential societal interests—a threshold the Commission says has not been met in this case.

The warning sets a two-month deadline for Spain to respond. It is not yet clear what immediate effect, if any, the letter will have on the BBVA-Sabadell transaction, which is in its final stages of regulatory review before being submitted to Sabadell shareholders.

Related: Spain Puts Brakes on BBVA-Sabadell Merger, Deal Faces Uncertain Future

Spain’s Economy Ministry has acknowledged receipt of the EU’s concerns, stating it will respond within the designated period. The ministry emphasized that the contested legislation has long been in place and applied consistently, asserting Spain’s “clear commitment to the principles of the single market and the rule of law.”

In a separate statement, the European Commission argued that elements of Spain’s banking and competition laws interfere with powers that are the exclusive domain of the European Central Bank and other EU-level regulators. The Commission noted that Spain’s broad discretionary authority over mergers infringes upon EU guarantees of capital movement and the freedom of establishment.

As the deal awaits final sign-off from Spain’s financial markets regulator—expected in the coming weeks—debate continues over the merits of the merger. Some analysts question whether BBVA should proceed, suggesting the bank might be better off returning capital to shareholders. Others believe potential cost savings justify moving ahead, even if integration takes longer than initially expected.

BBVA, for its part, reaffirmed its commitment to the bid in a late June statement, citing long-term value creation for both firms’ shareholders. The bank acknowledged that Spain’s conditions could delay anticipated synergies but insisted the transaction remains strategically sound.

Source: Bloomberg