The body is in conflict over Brussels' threat regarding BBVA's takeover bid: "There should be no conflict."

The European Commission 's statement that there are no grounds for the government to reject BBVA's takeover bid for Banco Sabadell sparked some concern, and also surprise, in the Spanish government yesterday. Brussels even threatened to "use its powers" if the executive branch overstepped its bounds and ended up outside EU regulations. Now, Economy Minister Carlos Cuerpo has responded to the clash.

"I hope there's no conflict of any kind. We're being very respectful of the legal framework , the domestic framework, and there shouldn't be any conflict of any kind," Cuerpo emphasized in an interview on Cadena Ser. In this regard, the minister emphasized that "domestic regulations are aligned with European regulations" and that's what they're following to the letter, he says.

The Minister of Economy defends that they are being "scrupulous and safeguarding" with the procedure, thus rejecting the public threats from Brussels. The European Commission's statement yesterday drew attention, as they do not usually comment on specific transactions, but in this case they chose to do so. Furthermore, their words reached the general public shortly after the Commission itself decided to submit the takeover bid to the Council of Ministers to intervene in the transaction, modifying the conditions set by the National Commission on Markets and Competition (CNMC).

Brussels even reminded the Spanish government that the competent authorities have already issued their opinions: the CNMC and the European Central Bank (ECB). In this regard, the Commission stated that it expects the Executive to align itself with the favorable pronouncements of these two institutions.

"Brussels' pronouncement must be made regarding the alignment of our regulations with European regulations. We follow the regulations to the letter, and Brussels is the guarantor of the protection of the Treaties. It has to do with whether Member State regulations are aligned with European regulations. We believe our regulations were already tested in the Phase 3 intervention in the past and are aligned with European regulations," Cuerpo added.

Beyond the legal aspect, the minister did acknowledge that they could discuss the "substantive" aspects of the takeover bid in terms of how to move toward banking union and the consolidation of the sector in Europe to create larger banks and better compete internationally. But what the minister did in this case was take the matter to his own turf to argue that economic policy objectives also include continuing to provide credit to SMEs and protecting jobs.

From the statement made by the Ministry, it can be deduced that the Government has no intention of backing down on its intervention to torpedo the operation. In theory, what the Council of Ministers could do is soften, maintain, or tighten the conditions set by the CNMC. And it now has 30 calendar days to do so.

The Minister of Economy has argued that the concept of "general interest" is not analyzed in the examinations already conducted by the CNMC or the ECB, which are dedicated to competition and financial stability. Therefore, he considers it essential that the Government ensure its protection.

It is within this broad concept that Pedro Sánchez's administration is moving, and the minister has given some insight into where they might attack. He highlighted the protection of financial inclusion, with the maintenance of a rural banking network; also the protection of employment; and the ability to provide credit to SMEs, which is one of the most controversial issues in this takeover bid due to pressure from Banco Sabadell itself.

Much of the presentation revolved around the rural sector. "We're going to make a very grounded assessment in line with the law, always being proportional in the conditions, if they are imposed, to protect the general interest," he stated, adding that they will take into consideration "the proximity of regional banks to the productive sector."

Banco Sabadell is a mid-to-large bank in Spain with unique characteristics. It has a strong presence in the SME business and has strong roots and connections in certain regions such as Catalonia, the Valencian Community, and the Balearic Islands . This is a strength that Carlos Cuerpo believes must be protected.

Cuerpo cited as an example the importance of smaller, more regionally-based banks like Sabadell during COVID. "The presence of these types of banks, which aren't centralized or large but rather grounded in the region, with better customer knowledge and better risk awareness, were able to maintain the survival of these companies, which have survived thanks to their presence on the ground," he noted.

That's why the minister argues that "diversification is an asset," meaning we need to have large banks, but also " medium-sized and small banks that are more grounded in the region . We have to look out for that general interest."

He also looked back even further, to the previous decade, to note that the banks that have remained in small rural towns are "cooperatives, savings banks, or small regional banks" that have greater social ties and objectives, since, in these cases, "profitability isn't the only thing on the table. This is the case with Abanca in Galicia."

"We have to put that in place. We want to protect that general interest. And the presence of these entities protects economic activity in the municipalities where they operate, and therefore, economic development and employment," Cuerpo emphasized.

Another member of the government, the Minister of Culture and spokesperson for Sumar, Ernest Urtasun, has also spoken out about Brussels' threat to Spain regarding the BBVA takeover bid. He asked Prime Minister Pedro Sánchez to "be firm" in his meeting this Wednesday with the President of the European Union, Ursula von der Leyen, regarding the operation, according to Ep.

"It seems that the European Commission has forgotten the lessons of the financial crisis: that large banking concentrations generate enormous risks for the economy. And it seems that the Commission has forgotten this," the parliamentary spokesperson stressed.