EU Scrutinizes Italy’s Golden Power in UniCredit Banco BPM Banking Takeover

The European Commission has significantly heightened its scrutiny of Italy’s application of its “Golden Power” in the proposed takeover of Banco BPM by UniCredit, citing potential infringements of European Union law. This intervention underscores a growing tension between national security provisions and the foundational principles of the EU’s single market, particularly within strategically vital sectors such as banking. The Commission’s cautionary signal serves as a critical litmus test for how member states can impose conditions on substantial corporate mergers without undermining the EU’s established competition and free movement regulations.

• The European Commission has flagged Italy’s “Golden Power” decree in the UniCredit-Banco BPM merger as a potential breach of EU law.
• Italy’s Prime Minister’s office issued a decree on April 18, imposing conditions on the UniCredit acquisition of Banco BPM.
• The Commission expressed concerns that these conditions may violate Article 21 of the EU Merger Regulation and other EU provisions, including free movement of capital.
• An Italian court partially annulled the decree on July 12, adding complexity to the regulatory landscape.
• The proposed €10 billion deal faces uncertainty, with the offer period for the takeover set to expire on July 23.

The core of the dispute revolves around UniCredit, Italy’s second-largest bank, and its ambition to acquire Banco BPM, the nation’s third-largest financial institution. While the European Commission had conditionally approved UniCredit’s acquisition on June 19, the Italian Prime Minister’s office had previously, on April 18, issued a decree that levied specific obligations on UniCredit should the takeover proceed. This decree leveraged Italy’s “Golden Power” rule, a mechanism specifically designed to safeguard national security interests by empowering the government to block or stipulate conditions on corporate takeovers within designated strategic sectors.

Regulatory Challenges and EU Oversight

The European Commission’s apprehension primarily stems from the compatibility of these national conditions with the broader framework of EU law. Specifically, the Commission cautioned that the obligations imposed by Rome “may constitute a breach of Article 21 of the EU Merger Regulation (EMUR) and of other provisions of EU law.” Article 21 permits member states to protect legitimate interests, provided such measures adhere to general EU principles, are proportionate, non-discriminatory, and remain subject to Commission scrutiny to prevent fragmentation of the single market. Beyond Article 21, the Commission also indicated that Italy’s approach could potentially infringe upon EU laws governing the free movement of capital and the prudential oversight exercised by the European Central Bank.

Following the issuance of the Italian decree, the Commission formally requested additional information from Italy on May 26, receiving a response on June 11. After a thorough analysis of Italy’s justification, the Commission concluded that “the conditions’ justification currently lacks sufficient reasoning” and asserted that the decree should have undergone Commission review prior to its implementation. Further complicating the matter, an Italian court partially annulled the decree on July 12, introducing another layer of legal complexity to the proposed transaction.

Market Impact and Deal Prospects

The persistent regulatory uncertainty casts a considerable shadow over the potential €10 billion deal, an offer UniCredit initially extended to Banco BPM late last year. Banco BPM had previously rejected UniCredit’s bid, asserting that it “did not reflect in any way the profitability and further potential to create value for Banco BPM shareholders.” With the offer period for the deal scheduled to expire on July 23, the European Commission awaits a further response from Italy before determining its subsequent actions. This evolving situation vividly illustrates the delicate equilibrium between national sovereignty in strategic economic sectors and the overarching framework of the European Union’s deeply integrated market.