CNMC approves the merge of BBVA and Banco Sabadell subject to remedies

The Spanish National Markets and Competition Commission (CNMC) has authorised, in phase two and after 11 months of analysis, the merge of BBVA and Banco Sabadell. The combined entity would be the second-largest Spanish financial institution in terms of credit volume, after CaixaBank. The authorisation is subject to a series of unprecedented remedies in the Spanish financial sector.

– Among the remedies, one that stands out is the commitment to not close branches where there is no other branch within 300 meters; in postal codes with a per capita income below €10,000; where there are fewer than three competitors; or in municipalities with fewer than 5,000 residents.

– The remedy to maintain the commercial terms and conditions for retail customers, the self-employed and SMEs in postal codes with fewer than four competitors also stands out.

– Furthermore, BBVA will create an account for vulnerable customers from both Banco Sabadell and BBVA, with no fees and a free debit card, among other conditions.

– As for SMEs and the self-employed, in addition to not closing any of the Banco Sabadell branches specialising in businesses, BBVA has also committed to maintain working capital credit lines for three years (extendable by two more years, should the CNMC decide to do so) for all SMEs banking with Banco Sabadell and the credit lines and goods import-export facilities for all Sabadell self-employed customers. Moreover, BBVA commits to maintain the total credit volume for SMEs whose aggregated CIRBE¹ credit exposure with BBVA and Banco Sabadell is at least 85 per cent. In the Autonomous Communities where the share of the resulting entity’s SME lending segment will be higher (Catalonia and the Balearic Islands), this remedy will apply to SMEs whose aggregated CIRBE¹ credit exposure is at least 50 per cent.

– In addition, for SMEs and the self-employed in postal codes where there are fewer than four competitors, prices of the new credit flow will not exceed the average price applied at national level.

– As for the acquiring services market (POS), BBVA has committed to maintain the terms of acquiring services contracted by SMEs and self-employed customers with either BBVA and/or Banco Sabadell.

“The union with Banco Sabadell is a project of growth, which will allow us to increase our lending capacity to businesses and households by an additional €5 billion per year. Furthermore, the remedies that we assume favor financial inclusion, territorial cohesion, credit for SMEs and the self-employed, and preserve competitiveness—especially in places where Banco Sabadell has a greater presence, such as Catalonia,” said BBVA Chair Carlos Torres Vila.

As stated by the CNMC in a press release, “considers that the remedies presented by BBVA are adequate, sufficient and proportionate to solve the problems that this concentration poses for competition in the affected markets.”

Regarding the next steps, following this authorisation by the CNMC and as established by Law 15/2007 on the Defense of Competition, the Ministry of Economy has fifteen working days to decide whether to refer the concentration to the Council of Ministers. Should it do so, the Council of Ministers will assess the transaction based on public interest criteria other than the protection of competition, and it must issue its decision within a maximum period of one month (calendar days).

DETAILS OF THE REMEDIES
The CNMC has approved the BBVA and Banco Sabadell transaction, subject to compliance by BBVA with the following remedies, which will have a duration of three years, unless otherwise indicated.

In order to guarantee financial inclusion, territorial cohesion and protection for vulnerable customers, BBVA commits to:

– Not closing branches where there is no other nearby branch (BBVA or Banco Sabadell) within a radius of at least 300 meters. [Remedy 4.3]
– Not closing offices in those postal codes with a per capita income of less than €10,000 (205 postal codes). [Remedy 4.4]
– Not leaving behind any municipality (nor substituting via an agent, a mobile bank or other means) in which there are fewer than three competitors (49). [Remedy 4.1]
– Customers in these municipalities will be offered the “Correos Cash” service, with two free weekly transactions under €2,500 each. [Remedy 4.8]
– Not closing branches in municipalities with fewer than 5,000 inhabitants where at least one of Banco Sabadell or BBVA operates (140 municipalities).[Remedy 4.5]
– Not closing the offices of Banco Sabadell specializing in businesses in all of Spain [Remedy 4.6]
– Maintaining teller services with the same business hours at all BBVA and Banco Sabadell branches. [Remedy 4.7]
– Creating an account for vulnerable customers, with no opening, administration and maintenance fees; a free debit card and free, unlimited domestic transfers through digital channels, and no fees in currency transfers, among other terms and conditions. [Remedy 2]
– Not closing off-premises ATMs in postal codes where there is only one or no other competitor (currently 11 BBVA off-premises ATMs, to which Banco Sabadell off-premises ATMs will be added). [Remedy 4.10].
– Maintaining access to Banco Sabadell’s ATM network for all customers of the entities belonging to the Euro 6000 and – – –
– Cardtronics networks for a period of 18 months, on the same terms they had with Banco Sabadell. [Remedy 6.1]
Maintaining Banco Sabadell’s current fees policy for ATM withdrawals using cards issued by other banks, for 18 months or until the merger is completed. [Remedy 6.2]

With the aim of ensuring lending for SMEs and the self-employed, BBVA commits to the following remedies²:

– Maintaining the working capital credit lines (financing with a term of one year or less), including those intended for imports and exports of goods, contracted by all SMEs with Banco Sabadell. [Remedy 8.1]
– Maintaining the credit lines and goods import-export facilities with a term of one year or less contracted by all self-employed individuals with Banco Sabadell. [Remedy 8.1]
– Maintaining the total credit volume for SMEs whose aggregated CIRBE¹ credit exposure with BBVA and Banco Sabadell is at least 85 per cent. [Remedy 8.2]
– In those Autonomous Communities where the resulting entity’s market share in the SME segment exceeds 30 percent with an addition greater than 10 percent (in this case, Catalonia and the Balearic Islands), maintaining the total credit volume for SMEs whose aggregated CIRBE¹ credit exposure with BBVA and Banco Sabadell is at least 50%. [Remedy 8.2]
– The CNMC will assess the effectiveness of these measures after three years and decide whether to extend them for another two. [Remedy 14.7]

In order to guarantee that commercial terms and conditions are maintained for retail customers, SMEs and the self-employed, BBVA commits to:

– Maintaining the commercial terms and conditions in postal codes with fewer than four financial institutions (174 postal codes). [Remedy 5.1]
– Furthermore, for SMEs and the self-employed in these postal codes, new loan prices will not exceed the national average for each rating level and financing product that is granted (174 postal codes). [Remedy 5.4]
– Maintaining the terms of acquiring services (POS⁴) contracted by SMEs and self-employed customers with BBVA and/or Banco Sabadell. [Remedy 9]

Moreover, in line with previous transactions, BBVA has committed to divest certain levels of stakes in payment processing companies (Redsys, Sistema de Tarjetas y Medios de Pago, Bizum and Servired) as mandated by these companies’ bylaws. [Remedy 7]

Finally, BBVA has also committed to make the standard customer service channels available to address any issues related to the implementation of the remedies, and has committed to collaborate with the CNMC to confirm proper compliance with all remedies.
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¹ Central de Información de Riesgos del Banco de España
²Unless there is a breach of anti-money laundering regulations or international sanctions; forgery of data is detected; or there is a significant increase in credit risk under the terms set out in the Banco de España’s Circular 4/2017.
³ Point of sale terminals

Source: BBVA