EU shakes up bank takeover rules

Europe’s central banks and national banking authorities will lose “abused” powers to block takeovers, under new European commission proposals.

European internal market commissioner Charlie McCreevy has unveiled new tougher EU rules to ease cross-border banking mergers.

He is seeking to reduce arbitrary interference or blocking by central banks or national supervisory authorities following a number of high-profile cases.

“My role is to make sure that no undue obstacles stand in the way of market operators,” he said.

“Undue interference by regulators, national or supra-national authorities in the implementation of a business decision that would have resulted in consolidation would prevent the proper functioning of the market.”

“In the extreme, an abusive use of powers could frustrate and render impractical an otherwise economically justifiable initiative.”

Criteria allowing national regulators to carry out so-called prudential assessments in the probity and financial suitability of merger players are to be tightened.

“Until now, EU rules have allowed supervisory authorities to block proposed mergers and acquisitions in the financial sector on the grounds of 'suitability of the proposed acquirer',” he said.

“Unfortunately, these rules did not provide any clarity on what an assessment for 'suitability' should entail.”

“They do not provide specific criteria for assessing the suitability of the acquirer and thus afford considerable latitude to the relevant authorities in accepting, discouraging or even rejecting a proposed acquisition.”

McCreevy has set out a menu of options allowing a probe into the reputations or experience of acquirers or CEOs, financial soundness, compliance with EU financial law and risk of money laundering or terrorism financing.

“This closed list is critical to ensure that the assessments do not go beyond what is necessary to carry out a prudential assessment.”

“You will appreciate that the first three criteria would provide adequate coverage of what could be envisaged in determining the 'suitability' of a proposed acquirer,” he said.

“Anything going beyond these criteria is difficult to justify as the last two criteria remind us that we are in the presence of a sector that is already heavily regulated.”

McCreevy has proposed a clear notification and decision-making process and eadlines will be reduced, from 90 days to 30 days.

The new rules should avoid reruns of a bitter rows between the commission, Italy and Poland after the central banks in both countries attempted to block foreign bids for domestic banks.

The new proposals must be agreed by both Europe’s finance ministers and the European parliament, Poland has registered strong opposition.

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