EC eyes new rules to ease M&A deals in the financial sector18 September 2006

The financial services sector still lags behind other industries in consolidation despite a recent pick-up in activity, according to Charlie McCreevy.
The EU Commissioner for Internal Market made the comment as he yesterday unveiled a new proposal to refine the directives governing the approval of mergers in the financial sector and reduce the level of discretion left to national supervisory authorities to block or impede deals.
In a speech in Brussels, he said: “Until now EU rules have allowed national regulators to block proposed mergers in the financial sector. Unfortunately, these rules don’t provide any clarity or specific criteria to assess the suitability of proposed acquirers.”
The proposal, which comes as amendments to existing directives, aims at avoiding uncertainties in supervisory authorities’ assessments and address shortcomings of current directives in the banking and securities sectors. According to McCreevy, it will ensure these authorities assess domestic and cross-border mergers in a transparent and consistent manner. “There should be no room for political interference or protectionism,” he said. “This is the only way to go if we are serious about improving growth in Europe.”
To reduce the subjectivity of national supervisory authorities, McCreevy believes specific criteria for regulators to assess deals are necessary and the scope for such assessment should be reduced from three months to 30 working days. “The aim is to limit the number of criteria and take away the wide discretion available to supervisory authorities on proposed acquirer."
Criteria to be taken into account includes the reputation of the proposed acquirer and people running the business, its financial soundness, compliance with relevant EU directives in the financial sector and the risk of money laundering and terrorism financing. “Anything that goes beyond that would be difficult to justify” he warned. “Any negative decision would have to be articulated.”
The proposed changes, which need the approval of the Council of Ministers and the Parliament, follows several disputes between the European Commission and national authorities over banking mergers. The more recent case relates to Unicredit’s acquisition of BPH, which was strongly opposed by the Polish government. Both the EC's DG Competition and DG Internal Market have started infringement proceedings against Poland and despite the agreement between Poland and Unicredit, the EC has not yet decided whether it would pursue proceedings or not, McCreevy insisted. “The case is not yet closed; we hope to decide within the next couple of months.”
Italy was also on the Commission’s black list after its central bank tried to block the takeovers of national banks by companies from other member states. But Italy has learned its lessons since, said McCreevy, and the Italian banking market has picked up with consolidation over the last six months. “Italy now seems at the forefront of consolidation, not only with Italian banks acquiring banks in other member states but with consolidation taking place on the Italian market itself,” he said. “Other member states have to catch up.”

by Sandra Pointel

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