After months of hopeful expectations, vehement opposition, resulting delays, Monday’s surprise power outage and last but not least today’s rumours and denials, the CNMC has finally issued its Phase 2 ruling on the still pending hostile takeover of Banco Sabadell (SAB SM / Market Cap EUR14bn) by BBVA (BBVA SM / EUR73bn) as just confirmed by BBVA in its press release:
Today, the CNMC has approved the combination between BBVA and Banco Sabadell, a growth project that will create a stronger bank with greater capacity to finance businesses and households—an increase we estimate at an additional €5 billion per year. The commitments we have made to the CNMC promote financial inclusion, territorial cohesion, and lending to SMEs and the self-employed, while safeguarding competition, particularly in the regions where our presence will be most significant, such as Catalonia.
As widely reported, the conditions are not overly onerous and acceptable to BBVA as per their own communication. We have summarised them below - you can find the details in the PR above:
Today, the CNMC has approved the combination between BBVA and Banco Sabadell, a growth project that will create a stronger bank with greater capacity to finance businesses and households—an increase we estimate at an additional €5 billion per year. The commitments we have made to the CNMC promote financial inclusion, territorial cohesion, and lending to SMEs and the self-employed, while safeguarding competition, particularly in the regions where our presence will be most significant, such as Catalonia.
As widely reported, the conditions are not overly onerous and acceptable to BBVA as per their own communication. We have summarised them below - you can find the details in the PR above:
- Branch Closures: BBVA commits to keeping branches open in areas with no other branch within 300 meters, low-income postal codes, regions with fewer than three competitors, or municipalities under 5,000 residents.
- Retail & SME Terms: Maintains commercial terms for retail customers, SMEs, and the self-employed in postal codes with fewer than four competitors.
- Vulnerable Customer Support: BBVA will create a no-fee account with a free debit card for vulnerable customers from Banco Sabadell and BBVA.
SME Credit Support:
- No Banco Sabadell business branches will be closed.
- Working capital credit lines for SMEs remain for three years, extendable by two more years if approved by the CNMC.
- Credit volume commitment: BBVA ensures continued credit access for SMEs with 85% CIRBE exposure, or 50% in Catalonia and the Balearic Islands.
- Pricing Protection: In areas with fewer than four competitors, SME credit prices will not exceed the national average.
- Acquiring Services (POS): BBVA maintains existing acquiring service terms for SMEs and self-employed customers at Banco Sabadell and BBVA.
As stated by the CNMC in a press release, “considers that the remedies presented by BBVA are adequate, sufficient and proportionate to solve the problems that this concentration poses for competition in the affected markets.”
The end of Phase 2 now starts a 15-calendar day window during which the government can trigger a Phase 3 and another month of review. In Phase 3, the Council of Ministers may impose additional conditions on grounds of general interest other than the defence of competition; these include national defence, free movement of goods and services, environmental protection or ensuring that the objectives of sectoral regulation are adequately maintained, but the list is neither exhaustive nor closed. In any case, in theory, the decisions of the Council of Ministers should be sufficiently reasoned to allow their subsequent control, in this case, directly by the Supreme Court.
This deal has now been in play for almost a year (anniversary on 9th May). As we have elaborated repeatedly in recent months, the merger control process led by the CNMC can, under exceptional circumstances, move into a Phase 3 review. Such a review is highly uncommon, with only one recent precedent on which we elaborate in more detail below. From the outset, however, this deal has been marked by irregularities: From a leaked hostile offer in the FIG sector during the Catalan election campaign, to unprecedented delays in the CNMC's review, and political interference at various stages. So far, he Spanish government's stance of opposition against the transaction has remained consistent over the past year.
In this note, we outline the key upcoming milestones for the deal and provide a brief recap of the political engagement and commentary from the main actors involved.
The CNMC Phase 3 process and timing
We thought it useful to briefly recap the antitrust process at play here. Spain has a mandatory and suspensory merger control regime, which means that transactions that meet the relevant criteria need to be notified to the competition authority and cleared before they can be completed. As of July 2023, the main changes introduced by RDL 5/2023 in relation to merger control relate to time limits. Article 36 Ley de Defensa de la Competencia (“LDC”) was the target for these changes, as the CNMC's Council is given a new time limit for issuing and notifying resolutions in merger control proceedings.
The Phase 3 is initiated when the CNMC’s Phase 2 decision (either to block a merger or to approve it with significant conditions) is referred to the Council of Ministers for further consideration. This allows the Spanish government, via the Council of Ministers, to override or add further conditions to a CNMC decision based not just on competition grounds, but on a "non-exhaustive list of specific criteria” based on broader public interest factors like national defence, financial stability, or regional economic concerns (see fig #).
The end of Phase 2 now starts a 15-calendar day window during which the government can trigger a Phase 3 and another month of review. In Phase 3, the Council of Ministers may impose additional conditions on grounds of general interest other than the defence of competition; these include national defence, free movement of goods and services, environmental protection or ensuring that the objectives of sectoral regulation are adequately maintained, but the list is neither exhaustive nor closed. In any case, in theory, the decisions of the Council of Ministers should be sufficiently reasoned to allow their subsequent control, in this case, directly by the Supreme Court.
This deal has now been in play for almost a year (anniversary on 9th May). As we have elaborated repeatedly in recent months, the merger control process led by the CNMC can, under exceptional circumstances, move into a Phase 3 review. Such a review is highly uncommon, with only one recent precedent on which we elaborate in more detail below. From the outset, however, this deal has been marked by irregularities: From a leaked hostile offer in the FIG sector during the Catalan election campaign, to unprecedented delays in the CNMC's review, and political interference at various stages. So far, he Spanish government's stance of opposition against the transaction has remained consistent over the past year.
In this note, we outline the key upcoming milestones for the deal and provide a brief recap of the political engagement and commentary from the main actors involved.
The CNMC Phase 3 process and timing
We thought it useful to briefly recap the antitrust process at play here. Spain has a mandatory and suspensory merger control regime, which means that transactions that meet the relevant criteria need to be notified to the competition authority and cleared before they can be completed. As of July 2023, the main changes introduced by RDL 5/2023 in relation to merger control relate to time limits. Article 36 Ley de Defensa de la Competencia (“LDC”) was the target for these changes, as the CNMC's Council is given a new time limit for issuing and notifying resolutions in merger control proceedings.
The Phase 3 is initiated when the CNMC’s Phase 2 decision (either to block a merger or to approve it with significant conditions) is referred to the Council of Ministers for further consideration. This allows the Spanish government, via the Council of Ministers, to override or add further conditions to a CNMC decision based not just on competition grounds, but on a "non-exhaustive list of specific criteria” based on broader public interest factors like national defence, financial stability, or regional economic concerns (see fig #).
Fig 1: Translation of Article 10 of Spanish Competition Law (Source: BOE)
This “third review” sits outside the traditional remit of the CNMC and shifts the spotlight firmly onto political decision-making. It is technically available in any deal where the CNMC prohibits a transaction or imposes remedies, yet bar one exception has never been used. The only instance was the Phase 3 review in 2012 of the merger between media companies Antena 3 and La Sexta. Initially, the CNMC’s predecessor, the CNC, approved the merger in July 2012 but imposed stringent conditions to address concerns about reduced competition in the free-to-air television advertising market. Dissatisfied with these conditions, the merging parties appealed to the government. Within the one-month statutory period, on the 24th August of the same year, the Council of Ministers softened the CNMC's conditions, aligning them more closely with those applied in a previous merger between Telecinco and Cuatro. It was the first time that the Council of Ministers had made such amendments under the Spanish Competition Act. This decision facilitated the completion of the merger without extending the one-month deadline, despite falling in the summer holiday period.
The 2007 Spanish Competition Law establishes that if the CNMC imposes requirements after the completion of the Phase 2, the Ministry of Economy, spearheaded by Carlos Cuerpo, will have the authority to decide in a period of 15 calendar days whether to submit the CNMC’s ruling to the Council of Ministers. This would officially trigger the Phase 3 that will last for an additional 30 calendar days, during which all ministries can provide input. During this time, the government can validate, relax, or strengthen the CNMC's conditions based on non-competition-related criteria. However, the law is vague enough to give the government the ability to block the takeover if it wanted to. Furthermore, it is open for debate whether the Government can stop the clock if it considers that it needs more information from the parties to make a decision.
In fact, recently the newswire Agencia EFE, a Spain-SOE-controlled entity, reported that the Spanish government could take “several months” to decide what conditions it would impose on BBVA once the CNMC approves the transaction. We believe such government sources are relevant here, given that Agencia EF is de facto the go-to agency of the government when they want to send a message to the market and whose current President was appointed by Pedro Sanchez in Dec 2023. Sabadell in its takeover microsite currently expects a resolution by the government on the Phase 3 during the second quarter of this year.
The 2007 Spanish Competition Law establishes that if the CNMC imposes requirements after the completion of the Phase 2, the Ministry of Economy, spearheaded by Carlos Cuerpo, will have the authority to decide in a period of 15 calendar days whether to submit the CNMC’s ruling to the Council of Ministers. This would officially trigger the Phase 3 that will last for an additional 30 calendar days, during which all ministries can provide input. During this time, the government can validate, relax, or strengthen the CNMC's conditions based on non-competition-related criteria. However, the law is vague enough to give the government the ability to block the takeover if it wanted to. Furthermore, it is open for debate whether the Government can stop the clock if it considers that it needs more information from the parties to make a decision.
In fact, recently the newswire Agencia EFE, a Spain-SOE-controlled entity, reported that the Spanish government could take “several months” to decide what conditions it would impose on BBVA once the CNMC approves the transaction. We believe such government sources are relevant here, given that Agencia EF is de facto the go-to agency of the government when they want to send a message to the market and whose current President was appointed by Pedro Sanchez in Dec 2023. Sabadell in its takeover microsite currently expects a resolution by the government on the Phase 3 during the second quarter of this year.
Fig 2: CNMC’s Phase 3 timetable without stop-the-clocks for RFIs (Source: MKP)
Echoing this timing ambiguity, Spanish Prime Minister Pedro Sánchez in late January emphasized in Davos the need to consider factors such as “territorial cohesion” - another vague concept whose relevance to a banking merger remains unclear, but one that mirrors the same legal ambiguity allowing the government to broaden the scope of purely competition-related conditions that are the remit of the CNMC. Those comments were picked up by Sabadell’s Chairman Josep Oliu, who took the opportunity to use the same wording to frame his opposition to the takeover: “The government must look out for the common good,” Oliu said. “In Phase 3, I understand, one of the things the government will look at is territorial cohesion”. Referring directly to Sánchez’s remarks in Davos, he added that “this could be the damage the operation could have on regions like Catalonia”. The Minister of Economy, Carlos Cuerpo, has always been against the operation from the outset. More recently last week, Mr. Cuerpo during a visit to the US to discuss tariffs, he again warned of the government’s unease over the “excessive concentration” in the banking sector.
Decisions of the Council can be challenged before the National Court within two months of the notification of the decision and before the Spanish Supreme Court in cassation. In the case of government intervention (Phase 3), the final decision is subject to judicial review exclusively by the Supreme Court which would be the case here.
Feedback from our field trips in Barcelona and Madrid
In recent months, we have engaged with a broad range of stakeholders both in Barcelona and Madrid, including government officials, business organisations, the merging parties and their advisers, as well as other local constituents.
During meetings with officials from the Catalan Government in Barcelona late last year, it became evident that they were – and continue to be - strongly opposed to BBVA’s hostile takeover of Banco Sabadell. While not formally part of the CNMC’s regulatory review, these officials signalled their intention to exert their influence on the Spanish Government behind the scenes. Led by the regional branch of the Socialist Party (PSC) and its leader Salvador Illa, the Catalan Government outlined its objections, citing a lack of clear economic benefit and the potential erosion of Catalonia’s industrial fabric. The concern centred particularly on SME financing, a vital sector in Catalonia’s socio-economic fabric. Officials also warned that the merger could weaken the region’s financial ecosystem, notably in areas such as financial cybersecurity, where Sabadell holds significant expertise. Doubts were raised over BBVA’s willingness to maintain Sabadell’s longstanding support for SMEs or to preserve credit access in the aftermath of the merger. These concerns were echoed by two major Catalan business bodies with whom we also met (Pimec and the Cambra de Comerç de Barcelona) both of which appeared to be relying on public institutions, including the Catalan Government, to apply coordinated political pressure. There was a broader perception that the political alignment between the Catalan and Spanish socialist parties could serve as a lever to influence the final outcome. Fundamentally, regional authorities fear the transaction would shift control of a strategically important financial institution from Catalonia to Madrid — a concern compounded by BBVA’s exposure to volatile international markets such as Turkey and Mexico.
During our meetings in Madrid earlier this year, the general tone suggested that the Phase 3 remained a rarely used but potentially powerful instrument for the Spanish government. Among legal and advisory professionals with deep involvement in Spanish competition matters, the consensus was clear: Phase 3 is viewed as a legal safety valve—available if the government wishes to intervene directly, but burdened by procedural complexity and reputational risk, particularly when deployed for overtly political purposes. Nevertheless, many acknowledged that the current political climate—including the delicate governing coalition in Madrid and the prominence of Catalan voices in national politics, rendered the use of Phase 3 more plausible in this instance than in typical cases. Several legal experts with whom we met described the Phase 3 as a “wildcard tool,” not originally designed for bank mergers, but potentially adaptable under sufficient political pressure. Still, there was broad agreement that invoking it would require a compelling political mandate, such as that sustained by Sabadell as well as the two Catalan business bodies we met in Barcelona. However, it’s fair to assume that such move is widely anticipated by both the merging parties as well as market participants.
Post eventual clearance:
The Takeover Bid mechanicsOnce the CNMC approval is in place, the offer document has to be authorised by the CNMV upon which takeover offer will be published; Sabadell expects it to take place during the 2Q or 3Q. This will automatically kick off the start of the acceptance period that can last between 15-70 calendar days and would thus likely fall into the midst of the Spanish summer holidays during the 3Q.
Decisions of the Council can be challenged before the National Court within two months of the notification of the decision and before the Spanish Supreme Court in cassation. In the case of government intervention (Phase 3), the final decision is subject to judicial review exclusively by the Supreme Court which would be the case here.
Feedback from our field trips in Barcelona and Madrid
In recent months, we have engaged with a broad range of stakeholders both in Barcelona and Madrid, including government officials, business organisations, the merging parties and their advisers, as well as other local constituents.
During meetings with officials from the Catalan Government in Barcelona late last year, it became evident that they were – and continue to be - strongly opposed to BBVA’s hostile takeover of Banco Sabadell. While not formally part of the CNMC’s regulatory review, these officials signalled their intention to exert their influence on the Spanish Government behind the scenes. Led by the regional branch of the Socialist Party (PSC) and its leader Salvador Illa, the Catalan Government outlined its objections, citing a lack of clear economic benefit and the potential erosion of Catalonia’s industrial fabric. The concern centred particularly on SME financing, a vital sector in Catalonia’s socio-economic fabric. Officials also warned that the merger could weaken the region’s financial ecosystem, notably in areas such as financial cybersecurity, where Sabadell holds significant expertise. Doubts were raised over BBVA’s willingness to maintain Sabadell’s longstanding support for SMEs or to preserve credit access in the aftermath of the merger. These concerns were echoed by two major Catalan business bodies with whom we also met (Pimec and the Cambra de Comerç de Barcelona) both of which appeared to be relying on public institutions, including the Catalan Government, to apply coordinated political pressure. There was a broader perception that the political alignment between the Catalan and Spanish socialist parties could serve as a lever to influence the final outcome. Fundamentally, regional authorities fear the transaction would shift control of a strategically important financial institution from Catalonia to Madrid — a concern compounded by BBVA’s exposure to volatile international markets such as Turkey and Mexico.
During our meetings in Madrid earlier this year, the general tone suggested that the Phase 3 remained a rarely used but potentially powerful instrument for the Spanish government. Among legal and advisory professionals with deep involvement in Spanish competition matters, the consensus was clear: Phase 3 is viewed as a legal safety valve—available if the government wishes to intervene directly, but burdened by procedural complexity and reputational risk, particularly when deployed for overtly political purposes. Nevertheless, many acknowledged that the current political climate—including the delicate governing coalition in Madrid and the prominence of Catalan voices in national politics, rendered the use of Phase 3 more plausible in this instance than in typical cases. Several legal experts with whom we met described the Phase 3 as a “wildcard tool,” not originally designed for bank mergers, but potentially adaptable under sufficient political pressure. Still, there was broad agreement that invoking it would require a compelling political mandate, such as that sustained by Sabadell as well as the two Catalan business bodies we met in Barcelona. However, it’s fair to assume that such move is widely anticipated by both the merging parties as well as market participants.
Post eventual clearance:
The Takeover Bid mechanicsOnce the CNMC approval is in place, the offer document has to be authorised by the CNMV upon which takeover offer will be published; Sabadell expects it to take place during the 2Q or 3Q. This will automatically kick off the start of the acceptance period that can last between 15-70 calendar days and would thus likely fall into the midst of the Spanish summer holidays during the 3Q.
Fig 3: Sabadell and BBVA timelines of the hostile bid for Sabadell (Source: Sabadell and BBVA)
A back-end Merger?
In the scenario that the Spanish government approves the deal in Phase 3, and the offer is accepted by at least 50.01% of Sabadell shareholders, then the deal will enter into the second and final stage: the merger. In such instance, BBVA will need - once more - the authorization of the government. Specifically, such authorization would have to come from the Ministry of Economy which has specific powers with regard to the merger of two financial institutions. To recap, and as we already highlighted in our note last June, such powers are found under the §1 of the “12th additional provision” within the law 10/2024 of on “the organization, supervision and solvency of credit institutions”. Carlos Cuerpo has many times during the past few months referenced such powers as a leverage to intervene in the ongoing deal. Below we put a snippet of the exact provision:
In the scenario that the Spanish government approves the deal in Phase 3, and the offer is accepted by at least 50.01% of Sabadell shareholders, then the deal will enter into the second and final stage: the merger. In such instance, BBVA will need - once more - the authorization of the government. Specifically, such authorization would have to come from the Ministry of Economy which has specific powers with regard to the merger of two financial institutions. To recap, and as we already highlighted in our note last June, such powers are found under the §1 of the “12th additional provision” within the law 10/2024 of on “the organization, supervision and solvency of credit institutions”. Carlos Cuerpo has many times during the past few months referenced such powers as a leverage to intervene in the ongoing deal. Below we put a snippet of the exact provision:
Fig 4: Translation of regulatory framework of the law governing Ministry of Economy powers to approve a bank merger (Source: BOE)
According to the latest offer prospectus that BBVA has submitted to the SEC, it expects to close the merger “between six and eight months” after formalizing the agreements with Sabadell's board, which would place the closing date for the spring of 2026.
Conclusion
The spotlight has remained firmly on the Spanish Government in recent weeks, as both banks intensify efforts to sway its decision in line with their interests. For one side, Sabadell has been raising concerns about the potential harm the merger could inflict on both the Spanish and Catalan economies. Meanwhile, BBVA has been portraying its hostile bid, for over a year, as a strategic move to strengthen corporate lending.
Given how politicised this situation has been from the outset, none of our contacts has a clear view as to how this will play out in a Phase 3. And unsurprisingly the opinions vary largely depending on where you sit on the intra-Spanish political spectrum and the debate on Catalonia. Whilst any competition concerns seem – and have always seemed – limited and surmountable as per today’s CNMC’s conditional approval, the real issue is the political landscape.
What is clear is on one side of the equation, BBVA needs the deal more than ever at many levels: At a personal level for management after a failed intimal attempt in late 2020, and at a business level to diversify and dilute the emerging market exposure to Mexico and Spain.
On the other side, Sánchez PSOE government depends on an unstable coalition propped up by regional parties, inter alia PNV from the Basque Country and Junts from Catalonia. We repeatedly highlighted that BBVA is not considered a Basque bank locally (as opposed to Kutxa), to the same extent as La Caixa is not considered a Catalan bank. That leaves Sabadell as the only sizeable Catalan bank. We were told repeatedly on our field trips that Sánchez would do anything to salvage his coalition and avoid early elections. In early April, former PSOE PM José Luis Rodríguez Zapatero admitted that he had been talking a lot with Junts per Catalunya and its leader Carles Puigdemont. They want to find a long-term solution to the Catalan issue. He also said it is important to recognise what makes Catalonia different from other regions, and he mentioned some specific steps that could be taken, such as giving more power to the region over things like migration policy. Given the fact that Zapatero plays a behind-the-scenes role in shaping some of Sánchez's policies and strategies we would not underestimate the importance of this. And then the question essentially boils down to where in those negotiations between Madrid and Barcelona features Sabadell and its future as an independent Catalan entity – and we have no clear answer to that question.
Conclusion
The spotlight has remained firmly on the Spanish Government in recent weeks, as both banks intensify efforts to sway its decision in line with their interests. For one side, Sabadell has been raising concerns about the potential harm the merger could inflict on both the Spanish and Catalan economies. Meanwhile, BBVA has been portraying its hostile bid, for over a year, as a strategic move to strengthen corporate lending.
Given how politicised this situation has been from the outset, none of our contacts has a clear view as to how this will play out in a Phase 3. And unsurprisingly the opinions vary largely depending on where you sit on the intra-Spanish political spectrum and the debate on Catalonia. Whilst any competition concerns seem – and have always seemed – limited and surmountable as per today’s CNMC’s conditional approval, the real issue is the political landscape.
What is clear is on one side of the equation, BBVA needs the deal more than ever at many levels: At a personal level for management after a failed intimal attempt in late 2020, and at a business level to diversify and dilute the emerging market exposure to Mexico and Spain.
On the other side, Sánchez PSOE government depends on an unstable coalition propped up by regional parties, inter alia PNV from the Basque Country and Junts from Catalonia. We repeatedly highlighted that BBVA is not considered a Basque bank locally (as opposed to Kutxa), to the same extent as La Caixa is not considered a Catalan bank. That leaves Sabadell as the only sizeable Catalan bank. We were told repeatedly on our field trips that Sánchez would do anything to salvage his coalition and avoid early elections. In early April, former PSOE PM José Luis Rodríguez Zapatero admitted that he had been talking a lot with Junts per Catalunya and its leader Carles Puigdemont. They want to find a long-term solution to the Catalan issue. He also said it is important to recognise what makes Catalonia different from other regions, and he mentioned some specific steps that could be taken, such as giving more power to the region over things like migration policy. Given the fact that Zapatero plays a behind-the-scenes role in shaping some of Sánchez's policies and strategies we would not underestimate the importance of this. And then the question essentially boils down to where in those negotiations between Madrid and Barcelona features Sabadell and its future as an independent Catalan entity – and we have no clear answer to that question.