A man takes shelter from the rain under an umbrella as he walks past the Euro sign in front of the former European Central Bank (ECB) building in Frankfurt am Main, West Germany.
Kirill Kudryavtsev | Episode | Getty Images
The European banking industry’s latest takeover battle is widely seen as a potential turning point for the region – especially for the bloc’s unfinished banking union.
Italy’s UniCredit has increased pressure on Frankfurt-based Commerzbank in recent weeks as it aims to become the biggest investor in Germany’s second-largest lender with a 21% stake.
The Milan-based bank, which took a 9% stake in Commerzbank earlier this month, appears to have caught German authorities off guard with the potential multibillion-dollar merger.
“The long-discussed move by UniCredit, Italy’s largest bank, to take control of Germany’s Commerzbank is a turning point for Germany and Europe,” said David Marsh, chairman of London-based OMFIF, an organization that regulates central banking and economic policy follows. said Tuesday in a written comment.
Whatever the outcome of UniCredit’s attack on Commerzbank, Marsh said the episode is “another big test” for German Chancellor Olaf Scholz.
The embattled German leader has strongly opposed the apparent takeover attempt and has reportedly described UniCredit’s move as an “unfriendly” and “hostile” attack.
“The dispute between Germany and Italy over UniCredit’s takeover maneuvers – labeled by Scholz as an unfriendly act – threatens to inflame relations between two of the European Union’s Big Three member states,” Marsh said.
“A compromise can still be found,” he continued. “But the hostility developing in Italy and Germany could hinder any meaningful step towards completing the banking union and integrating capital markets, which all sides say is necessary to lift Europe out of its malaise.”
What is the European Banking Union?
Designed in the wake of the 2008 global financial crisis, the European Union’s executive branch announced plans in 2012 to create a banking union to ensure that lenders across the region would be stronger and better supervised .
The project, which became a reality in 2014 when the European Central Bank took on its role as banking regulator, is widely considered incomplete. For example, the lack of a European Deposit Guarantee Scheme (EDIS) is one of the factors that has caused this cited as a barrier to progress.
European leaders, including Germany’s Scholz, have done so called repeatedly for greater integration into the European banking sector.
OMFIF’s Marsh said Germany’s opposition to UniCredit’s move on Commerzbank means Berlin “is now accused of promoting European banking integration only on its own terms.”
A German government spokesperson did not immediately respond when asked for comment by CNBC.
The logo of the German bank Commerzbank seen on a branch near the Commerzbank Tower in Frankfurt.
Daniel Roland | Episode | Getty Images
Hostile takeover bids are not common in the European banking sector, although Spanish bank BBVA shocked markets in May when it launched an all-stock takeover bid for domestic rival Banco Sabadell.
The head of Banco Sabadell said earlier this month that BBVA is highly unlikely to succeed with its multi-billion euro hostile bid. Reuters reported this. And yet Onur Genç, CEO of BBVA, told CNBC on Wednesday that the acquisition “went according to plan.”
Spanish authorities, who have the power to block any bank merger or takeover, have done just that have expressed their opposition on BBVA’s hostile takeover bid, citing potentially damaging consequences for the province’s financial system.
Mario Centeno, member of the European Central Bank’s Board of Governors, told CNBC’s “Street Signs Europe” on Tuesday that European policymakers have been working for more than a decade to create a “real banking union” — and continue to do so.
The unfinished project means the banking crisis intervention framework remains “an uneasy mix” of national and EU authorities and instruments, the Brussels-based think tank said. Bruegel.
Asked whether comments from leading politicians in both Germany and Spain against bank consolidation were a source of frustration, the ECB’s Centeno said: “We have worked very hard in Europe to [the] banking union to completion. There are still a number of issues on the table, we all know that.”
What happens next?
Thomas Schweppe, founder of Frankfurt-based consultancy 7Square and a former mergers and acquisitions banker at Goldman, said Germany’s decision – whether intentional or not – to give a small 4.5% stake to UniCredit earlier this month to sell meant that the bank was now “in the game”. a possible takeover.
“I think we are proposing, you know, a European banking landscape and also in Germany they are in favor of strong European banks that have a good capital base and are well managed,” Schweppe told CNBC’s “Squawk Box Europe” on Wednesday.
“If we are serious about this, I think we have to accept that European consolidation also means that a German bank will become the acquiree,” he added.
Asked for a timeline on how long the UniCredit-Commerzbank saga was likely to drag on, Schweppe said it could last months, “if not a year or more.” He cited a lengthy regulatory process and the need for conversations among all stakeholders to find a “palatable” solution.