Political feasibility − a recurring feature in European bank M&A

Political influence over bank M&A in the EU is not new, but it has rarely been this visible. Over the past two years, three of Europe’s most consequential bank transactions have shown that commercial rationale, competition clearance and prudential approval alone may not determine a transaction’s prospects. Political feasibility can be equally decisive. Then Vice-President of the European Central Bank (ECB), Luis de Guindos, was blunt in a May 2026 exit interview: "Political interference eats away at the credibility of the Single Market message".

Therein lies the paradox that we examine in this article. At EU level, virtually every institution is calling for larger, more integrated and more competitive banks; yet when a concrete transaction lands on a national doorstep, governments of every political colour reach for tools, formal and informal, to slow, condition or deter it. This means that for prospective buyers, the traditional assessment of a bank transaction may no longer be sufficient. Commercial viability must be considered alongside legal and regulatory feasibility. Increasingly, however, a different question is equally important: is the transaction politically feasible?

Need for European champions

The policy case for bank consolidation has rarely been stated more forcefully in the EU. The September 2024 Draghi report on European competitiveness identified fragmentation and lack of scale in EU banking as a constraint on financing Europe's investment needs. It called for the completion of the Banking Union, including a "country blind" jurisdiction for banks with substantial cross-border operations. Meanwhile, the Commission's Savings and Investments Union strategy of March 2025 identified an integrated banking sector as one of its central pillars. In July 2026, it further advanced that agenda by publishing a communication on the competitiveness of the EU banking sector, outlining measures to strengthen the sector and support growth.

The arguments for "European champions" in the banking sector are familiar: scale to fund investments in technology, deeper liquidity, risk-sharing across national cycles, and the ability to compete with far larger US banks. The ECB (for example, see here, here and here), and national supervisors, meanwhile, say they are not the obstacle to consolidation in the banking sector. Yet, large-scale, and especially cross-border, mergers remain rare, and European banking remains "closer to being a collection of national banking sectors than a truly integrated market". If prudential and competition rules are not the key obstacles, something else must be.

Legal and regulatory framework

On paper, large bank combinations are subject to parallel regulatory tracks designed to constrain political discretion. The relevant authorities must apply defined legal criteria, observe prescribed procedures and give reasoned decisions. The point is not that bank M&A should be easy to approve. Rather, approval should in principle be based on competition and prudential risks, not on whether a national government approves of the buyer's identity or finds the transaction politically attractive.

Merger control review

Where a bank transaction meets the EU dimension turnover thresholds under the EU Merger Regulation (EUMR), the Commission has exclusive jurisdiction to review it on competition grounds. Below those thresholds, one or more national competition authorities may have jurisdiction.

Member states may only take appropriate measures based on defined "legitimate interests" − public security, media plurality and prudential rules − which must be notified to and approved by the Commission before implementation. Any measure by a member state that effectively prohibits a transaction, or causes its abandonment through unjustified conditions or unduly lengthy review, may infringe EU law and prompt enforcement action by the Commission. The Commission's April 2026 Draft Merger Guidelines signal that such measures will be assessed with greater rigour and that member states bear the burden of ensuring that they are proportionate.

The substantive competition assessment itself is also evolving. The new Draft Merger Guidelines − expected to be adopted in the fourth quarter of 2026 − recognise that competition can be assessed not only on price but on a range of non-price parameters. For the first time, resilience and security of supply are expressly listed as relevant competition parameters. The introduction of these considerations into the competitive assessment may function as a double-edged sword. Because resilience and security of supply are framed as competition parameters − not as a one-way efficiency defence available only to the parties − the Commission may also invoke them in support of a theory of harm. A merger that concentrates credit supply to a particular sector or region or reduces the diversity of providers of critical financial infrastructure could, in principle, be found to harm resilience.

Closely related to merger control is the Foreign Subsidies Regulation, which entered into force in 2023. It provides the European Commission with an additional mechanism to scrutinise transactions. In the banking sector, especially where non-EU buyers are involved, this can result in increased political and strategic scrutiny alongside the traditional competition assessment.

Prudential assessment

In addition to any applicable merger control review, the acquisition of, or an increase in, a qualifying holding in a bank requires prior prudential assessment under the Capital Requirements Directive (CRD). That assessment is deliberately confined to a closed list of considerations: the reputation and financial soundness of the proposed buyer, the suitability of the target bank's future management following the acquisition, the target bank’s ability to continue complying with prudential requirements, and the risk of money laundering or terrorist financing. Supervisors may oppose an acquisition only based on those criteria or because the information supplied is incomplete. Member states may not impose more stringent approval requirements or demand information irrelevant to the prudential assessment.

Although these rules are implemented and applied through national legal systems, they are intended to operate uniformly across the EU. The Joint ESA Guidelines on the prudential assessment of acquisitions and increases of qualifying holdings support that objective by providing competent authorities with a common approach to the applicable procedures, assessment criteria and information requirements. 

The same harmonising approach now extends beyond acquisitions of qualifying holdings. Under CRD VI, member states were required, from January 2026, to introduce a harmonised prior prudential assessment framework for material acquisitions, transfers, mergers and divisions involving banks. In July 2026, the EBA supplemented that framework with final draft technical standards setting common  information requirements, procedures and assessment methodologies for such transactions. Here too, the focus is on the prudential profile and financial soundness of the resulting institution, rather than on national ownership preferences. CRD VI also expressly requires supervisors to act "independent[ly] and free from political and economic influence". 

National powers

Taken together, the above rules are intended to prevent the core competition and prudential assessments from becoming political vetoes. They do not, however, remove politics from bank M&A. Political influence instead operates around, alongside and sometimes through the formal approval framework. Indeed, member states have retained a range of instruments through which governments may influence, condition or delay a transaction.

These include foreign direct investment (FDI) screening regimes such as Italy’s so-called golden power regime and the Netherlands’ Investments, Mergers and Acquisitions Security Screening Act (Wet Vifo), as well as public-interest powers such as the Spanish government’s statutory role in certain merger cases. The boundaries of these powers are themselves being contested. In the recent BBVA/Banco Sabadell and UniCredit/Banco BPM cases, the Commission challenged aspects of the Spanish and Italian interventions on the basis that national measures could infringe EU banking regulations, internal-market freedoms and EU merger-control rules (see below).

Political influence need not, however, rest on formal powers. Public statements, state shareholdings and political pressure on boards, unions or other stakeholders may also affect the structure, timing and prospects of a transaction. Such informal influence may be "soft" in form, but its effects can be real and far-reaching, as the UniCredit/Commerzbank case below illustrates.

These powers, finally, do not serve governments alone. They may also become part of a target’s defensive strategy, especially in hostile take-over scenarios. Under the Dutch Wet Vifo for example, banks may qualify as "vital providers", meaning that an acquisition of control could be subject to prior clearance under that framework. Although a target cannot formally invoke the framework itself, it may press the government to scrutinise the transaction or make use of the powers available under it. Buyers should therefore expect political resistance to come not only from governments, but also potentially from targets seeking to persuade their governments to intervene.

Three deals, three different forms of political intervention

The recent Commerzbank, Banco Sabadell and Banco BPM cases illustrate the different channels through which political influence may affect bank M&A. In each case, national political intervention affected the transaction’s structure, attractiveness or viability, but through different means: informal political and shareholder pressure in Germany, public-interest conditions imposed through Spain’s merger-control regime, and strategic conditions imposed under Italy’s golden-power regime.

In September 2024, UniCredit disclosed a 9% stake in Commerzbank, acquired partly through a placement by the German state. By December 2024, it had built economic exposure of approximately 28%, including through derivatives. Then Chancellor Olaf Scholz warned against “unfriendly attacks”, adding that hostile takeovers were “not a good thing for banks”, while the German government, which retained a 12% stake, suspended further disposals. The prudential route nevertheless remained open: in March 2025, the ECB authorised UniCredit to increase its holding to 29.9%. In March 2026, UniCredit launched a voluntary exchange offer to cross a 30% threshold under German takeover law. Commerzbank’s boards recommended rejection and the federal government declined to tender, but by 3 July 2026 17.60% of the shares had been tendered, bringing UniCredit’s aggregate position to approximately 48%, subject to regulatory approvals. On 24 July 2026, Commerzbank chair Jens Weidmann called for constructive takeover talks, conceding that "the balance of power at the next Annual General Meeting is clear". The German case therefore shows that informal political opposition may not ultimately block a transaction, but can materially alter its route, increase its cost and prolong its timetable.

Parallel developments were meanwhile witnessed in Spain. In May 2024, after Banco Sabadell’s board had rejected a friendly approach, BBVA launched a hostile exchange offer. The proposed transaction cleared the ECB's prudential assessment in September 2024 and, subject to a package of largely behavioural commitments, the competition review conducted by Spain’s competition authority, the CNMC, in April 2025. However, an unexpected political hurdle followed. On 24 June 2025, acting under Spain’s Competition Act, the Spanish government authorised the transaction but required the banks to retain separate legal personalities, assets and autonomous management for three years, extendable by a further two. BBVA nevertheless proceeded and increased its offer by 10% in September 2025. When the acceptance period closed, however, only 25.47% of Banco Sabadell’s voting rights had been tendered, below the applicable 30% threshold, and the offer lapsed. Although political intervention was not the sole reason for the bid’s failure, the prospect of postponing integration for up to five years materially diluted its near-term value proposition and increased its execution risk.

In November 2024, UniCredit launched an unsolicited all-share offer for Banco BPM, disrupting the Italian government’s preferred plan to build a domestic "third pole" around BPM and state-backed Monte dei Paschi. Although the transaction cleared the Commission’s merger control review, subject to remedies, the government invoked its golden power regime in April 2025 and imposed a series of conditions extending well beyond conventional competition or prudential concerns. Several were subsequently annulled by the Lazio administrative court, while the Commission indicated that Italy’s intervention may have breached EU law. The uncertainty nevertheless persisted. On 22 July 2025, UniCredit withdrew the offer, citing the unresolved golden power requirements and the resulting inability to complete the transaction within the bid timetable.

Antonveneta: national protectionism is not new

Political interference in European bank M&A did not begin in 2024. Indeed, the harmonised prudential framework described above exists precisely because of an earlier episode of it. 

In 2005, ABN AMRO launched a bid for the Italian Banca Antonveneta. The Banca d’Italia, whose approval powers over acquisitions of holdings in banks were largely discretionary at the time, used those powers to obstruct the bid and favour the domestic counteroffer by Banca Popolare Italiana. Published wiretaps subsequently revealed Governor Antonio Fazio's personal involvement in favouring Banca Popolare Italiana's rival offer for Antonveneta. ABN AMRO ultimately secured control of Antonveneta in early 2006. By then, however, the affair had already prompted a response at the EU level. On 14 December 2005 the Commission opened infringement proceedings against Italy over its rules on acquisitions of stakes in domestic banks.

The more enduring response to Antonveneta, however, was legislative. Directive 2007/44/EC (colloquially referred to as the Antonveneta Directive) was adopted while the Italian episode was still fresh in the legislature's mind. It replaced the member states’ varied and often discretionary assessment regimes with a maximum-harmonisation framework, a closed list of prudential criteria and a strict timetable, all of which are now embedded in the CRD. From that point onward, supervisory authorities were required to confine their assessment to reputation, soundness, governance and financial-crime risk, and nothing else. Assessments by reference to the "economic needs of the market" were expressly prohibited. The closed prudential gate described above is, in other words, the direct legacy of Antonveneta. 

Yet Antonveneta’s later history also reveals what that reform could not achieve. The bank changed hands again in 2007, when Santander, having acquired it through the three-way break-up of ABN AMRO, sold it to Monte dei Paschi di Siena at a price widely regarded as having contributed to the latter’s eventual state rescue. Monte dei Paschi, still state-backed, has since become central to the Italian government’s ambition to create a domestic banking "third pole".

The trajectory is revealing. The post-Antonveneta reforms closed off the discretionary use of prudential assessments as an instrument of political intervention, but they did not remove politics from bank M&A. Political influence instead resurfaced through other channels. Two decades later, the Commerzbank, Banco Sabadell and Banco BPM cases show how persistent that influence remains.

European Commission's response

The renewed politicisation of bank M&A has, in turn, prompted a renewed response from the Commission. Twenty years after Antonveneta, it has again sought to defend the allocation of powers established by EU law. In Italy, the UniCredit/Banco BPM transaction had an EU dimension and therefore fell within the Commission’s exclusive jurisdiction under the EUMR. On 14 July 2025, the Commission sent Italy a preliminary assessment finding that the conditions imposed under the golden power decree might breach Article 21 EUMR and other provisions of EU law. It later opened infringement proceedings against the golden power framework itself. In response, Italy reformed the framework in January 2026, but the Commission reportedly concluded in March 2026 that the changes did not go far enough. In Spain, the BBVA/Banco Sabadell transaction fell outside the EUMR, so no equivalent transaction-specific route was available. The Commission therefore proceeded directly to infringement proceedings against the national framework. Its letters of formal notice in July 2025 and June 2026 argued that the relevant powers were incompatible with the SSM Regulation, the CRD and Articles 49 and 63 TFEU.

Germany presents the opposite case. After two years of vocal resistance, Brussels has taken no action. The reason is not unwillingness, but the absence of a legally reviewable measure. Berlin issued no decree (like Italy) and imposed no conditions (like Spain). It condemned UniCredit’s approach as aggressive, hostile and unacceptable, and it declined in its capacity as shareholder to sell or tender its own stake. Chancellor Merz drew that distinction himself in July 2026, when he stressed that the government had never sought to prevent the transaction. Political rhetoric and the state’s conduct as an investor do not amount to measures that can be annulled, notified under Article 21 EUMR or challenged through infringement proceedings. This creates an uncomfortable asymmetry. The more formal and rule-based the national intervention, the more exposed it is to EU law, while informal political resistance remains largely beyond the Commission’s reach.

Assessing political feasibility

For prospective buyers, the lesson of the past two years is not that cross-border bank consolidation has become impossible. The UniCredit/Commerzbank transaction alone disproves that. It is that political feasibility must be tested as rigorously as economic, prudential and competition feasibility, and priced into the valuation and timetable from the outset.

That process begins by mapping the political perimeter. Buyers should identify not only the authorities with formal powers under screening regimes, public-interest rules or state shareholdings, but also those capable of exerting informal pressure through boards, unions, regional interests or public opinion. The key question is not simply whether a government can block the transaction. But also whether political intervention could delay integration, discourage shareholders, increase execution risk or erode the expected synergies. Spain’s separation requirement in the BBVA/Banco Sabadell case shows that a government need not prohibit a transaction to weaken its commercial logic.

Political engagement should therefore begin early. Since prudential supervision moved to the ECB, a transaction may progress in Frankfurt before the relevant national government has been meaningfully engaged. The reaction in Berlin to UniCredit’s approach to Commerzbank illustrates the risk of allowing a transaction to be perceived as a fait accompli. Subject to takeover law, market-abuse rules and confidentiality requirements, engagement with finance ministries and other relevant stakeholders should form part of deal preparation, rather than begin only once political opposition has emerged.

Buyers should also anticipate demands extending beyond conventional competition or prudential concerns. Employment, branch networks, regional lending, headquarters, governance and geopolitical exposure may all become part of the discussion.

Finally, EU law remains important, but mainly as a constraint and source of leverage. Article 21 EUMR, national litigation and infringement proceedings may expose unlawful intervention and strengthen the buyer’s position. They are, however, less effective at preserving the timetable of a live bid. UniCredit withdrew from Banco BPM despite success before the Lazio court and intervention by the Commission.

The legal strategy should therefore support the transaction from the outset, but the transaction should never entirely depend on it. The central question for boards is how much political delay, conditionality and uncertainty the deal can bear before its original rationale falls away.

Concluding remarks

The paradox with which this article opened will not resolve itself. At EU level, the case for larger and more integrated banks is widely accepted. At national level, however, banks remain tied to employment, credit supply and strategic autonomy, and governments will continue to resist transactions they regard as politically undesirable.

Commission enforcement may narrow the scope for formal intervention. The proceedings against Spain and Italy, the Article 21 assessment and the harmonised merger assessment framework under CRD VI all point in that direction. But the German case shows the limits of legal discipline. Informal political resistance remains difficult to challenge, while security-screening regimes in the EU continue to expand. 

The experience of 2024–2026 shows that political opposition does not necessarily prevent bank transactions, but political feasibility can be as crucial to their prospects as commercial rationale, competition clearance and prudential approval. BBVA/Banco Sabadell failed, UniCredit/Banco BPM was abandoned, and UniCredit/Commerzbank shows that resistance may still be overcome. Until the Banking Union is completed and national attitudes towards strategic banking assets change, political feasibility will remain a central component of large-scale European bank M&A.