The European Commission has issued a formal warning against Spain, a step further in their fight to preserve the integrity of the EU’s Banking Union and internal market freedoms. The action follows concerns over Spanish laws that the Commission considers incompatible with core provisions of EU financial legislation and the Treaty on the Functioning of the European Union (TFEU).
In the letter, send on July 17, the Commission stated that Spain has failed to comply with the Single Supervisory Mechanism Regulation (Council Regulation (EU) No 1024/2013), the Capital Requirements Directive (Directive 2013/36/EU), and Articles 49 and 63 TFEU, which guarantee the freedom of establishment and the free movement of capital within the internal market.
At the heart of the Commission’s case are provisions in Spanish banking and competition law—introduced in 2014 and 2015—that grant the national government sweeping, discretionary powers to intervene in mergers and acquisitions involving banks. The Commission contends that these powers infringe on the exclusive competences of the European Central Bank (ECB) and relevant national supervisors as defined under EU law.
“These broad discretionary powers constitute unjustified restrictions on the freedom of establishment and the free movement of capital,” the Commission said in its statement. “Consolidation in the banking sector benefits the EU economy as a whole and is essential for the completion of the Banking Union. Such mergers ensure that capital is allocated efficiently across the EU and that citizens and businesses have access to competitively priced financial products—key objectives of the Union of Savings and Investments.”
The case emerges against the backdrop of BBVA’s hostile takeover bid for Banco Sabadell, announced in May 2024. The Commission clarified that the infringement procedure does not affect the status of that transaction but is aimed at the legal framework under which it is being evaluated by Spanish authorities.
A formal complaint submitted by a Spanish citizen shortly after the BBVA-Sabadell bid prompted the Commission to investigate the compatibility of Spain’s rules with EU law. Despite months of informal exchanges with Spain’s Ministry of Economy, no consensus was reached. Spain’s Economy Minister Carlos Cuerpo has publicly defended the current legal framework, insisting it is fully compliant with EU obligations.
However, the Commission maintains that Spain’s legal provisions—by allowing the executive to override supervisory assessments made by the ECB and the national competition authority (CNMC)—undermine the functioning of the single market and financial stability architecture.
The action is part of a broader EU effort to remove barriers to cross-border consolidation in the banking sector. Commission officials have expressed growing frustration that while national governments routinely voice support for the Banking Union, they often impose political hurdles when mergers are proposed. Similar concerns have arisen in Italy over the government’s conditions on UniCredit’s bid for Banco BPM, and in Germany regarding UniCredit’s investment in Commerzbank.
Given that BBVA and Sabadell conduct more than two-thirds of their business within Spain, the transaction falls primarily under Spanish jurisdiction. As such, the Commission could not intervene under standard competition policy tools. Instead, the case has been brought by Commissioner for Financial Services Maria Luís Albuquerque, relying on the EU’s financial regulatory framework and internal market provisions.
Spain now has two months to respond to the Commission’s letter and address the legal inconsistencies raised. If no satisfactory resolution is found, the Commission may proceed to issue a reasoned opinion, the second stage in the infringement procedure. Should non-compliance persist, the matter could be referred to the Court of Justice of the European Union, where Spain may ultimately face financial sanctions.
According to Commission statistics, Spain is already among the member states with the highest number of open infringement cases (91) and has a track record of slow compliance, particularly on issues affecting the single market.
This case reinforces the Commission’s message that political interference in banking consolidation will not be tolerated where it contradicts established EU rules and the exclusive mandate of the ECB. The broader implication is clear: the successful completion of the Banking Union requires not only regulatory convergence, but also the political will of national governments to cede discretion where EU law prevails.
