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EU opens up banking mergers

The European Commission has announced it intends to review the EU Banking Directive in the next few months in order to open up cross-border banking mergers.

At present the Directive allows member states to block M&A on prudential grounds. Article 16 forces any company intending to acquire a majority stake in a bank to notify the authorities of that country, who can then block the merger if they feel the bidder is unsuitable.

In the specific wording of the Article, a merger can be blocked if: ?in view of the need to ensure sound and prudent management of the credit institution, [the authorities] are not satisfied as to the suitability of the person.? A review of the Directive may lead to this Article being redrafted or removed.

While the European Commission is unlikely to prevent a member state from ever blocking a merger, it will try to make the grounds for any block as specific and transparent as possible, to ensure that deals are not obstructed for political reasons. It is feared that member states may hold up consolidation of Europe's fragmented banking market by trying to prevent the acquisition of national bank assets.

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