Of the large EU states, Spain has the highest banking concentration.

BarcelonaSpain is one of the major eurozone states with the highest banking concentration. The top five financial institutions in the Spanish market account for a 69.5% share, ahead of France (45.3%), Germany (33.4%), and Italy (48.7%), according to European Central Bank (ECB) data for 2023, the latest available. These concentration levels exclude the effects of potential integration resulting from BBVA's takeover bid for Banc Sabadell, which is currently on the Cabinet table.

The Spanish government must decide before the 27th of this month, likely at the Saint John's Day meeting, whether to set new conditions for integration, but based on the general interest, since the free competition conditions were already approved by the National Commission of Markets and Competition (CNMC) on April 30.

BBVA, for its part, The CNMC's endorsement of April 30 stands out. The Basque-based bank, which integrated six savings banks during the financial crisis—in addition to Banca Mas Sardà and Banca Catalana before it—emphasizes that it has 398 branches in Catalonia, "20% more than Sabadell," according to data provided by the Bank of Spain. The combined operation of both entities would allow it to reach 733 branches in Catalonia, "more than double Sabadell's current 335 branches." It also assures that it will strengthen its presence in municipalities with fewer than 10,000 inhabitants. And in one of its key areas, business with SMEs, where Sabadell maintains its strength, BBVA states that its market share in Catalonia will grow by 2.3% between 2021 and 2023 in the case of BBVA and fall by 3.9% in the case of the Valles-based bank.

The CNMC ultimately stipulated more demanding commitments in the SME sector due to the risks identified, particularly in Catalonia and the Balearic Islands. Regarding SME lending, the CNMC notes that, in the event of integration, the problematic or risk levels set by the European Commission would be exceeded in both territories. However, it considers that this would be resolved with the established temporary commitments.

In terms of demand, the CNMC concludes that "the majority of [SME] companies in the market (96.7%) have between one and two banking entities for their financing needs," while in the case of supply, "the irreplaceable nature of the third party cannot be accepted, nor can BBVA be its competitor in the SME lending market, since there are numerous medium-sized and small operators already competing [...] and which together represent a significant and growing share in all regions, including those most affected by the merger." To justify Sabadell's lower weight, the Competition Authority indicates that the bank would have lost market share in SMEs between 2021 and 2023.

The Catalan Competition Authority (Acco) analyzes the operation differently than the CNMCIn a recent assessment, it states that the commitments made by BBVA and endorsed by the CNMC "do not allow us to rule out all potential risks to competition." It adds: "In particular, they may not be sufficient to rule out the risk of a worsening of trading conditions for SMEs." The CNMC, on the other hand, interprets Sabadell as not irreplaceable in that market. It even points out that it is not irreplaceable in Catalonia, the autonomous community most affected if the merger is successful, as acknowledged in the agency's own interim report.

The Acco, which reports to the Ministry of Economy, emphasizes that the operation, if it goes ahead, could imply "a significant change in the market structure of the banking sector in Catalonia." In his opinion, it would mean "a notable increase in the existing degree of concentration – which is already high at present. This point would affect retail banking and payment services. And that, he adds, "could imply a significant reduction in competition in the banking sector in Catalonia."

Branches, credit, deposits and ATMs

The transaction, according to Acco's assessment, will result in a "considerable" concentration of bank branches, credit for both households and businesses, deposits, and ATMs. BBVA is currently the second-largest banking operator in Catalonia, and Sabadell is third. Although CaixaBank would remain the largest, the combined BBVA and Sabadell positions would approach it. Furthermore, the combined BBVA and Sabadell would account for over 70% of the market share. The third-largest, Santander, would be far behind, with between 6% and 13%, depending on the region.

Following the tools used by the European Commission, when an economic concentration results in an HHI indicator of between 1,000 and 2,000 and an increase in the index (delta) of 250 points or more, or when it entails an HHI greater than 2,000 and an increase in the index (5 and 0) that are high and may pose a risk to the competitive functioning of the market, the Acco recalls.

With this merger, the HHI for the whole of Catalonia would increase from 2,289 to 2,888, an increase of 599 points. At the provincial level, a high concentration is observed in all provinces. In Tarragona, the first two entities operate 67.6% of the branches, in Girona 65.6%, in Lleida 61.3% and in Barcelona 54.5%. If the acquisition goes through, the resulting bank would hold almost 38% of the branches in the province of Barcelona and would be the bank with the most branches. It would have a market share of 32.4% in Tarragona, 28.7% in Girona, and 24.5% in Lleida, but in all three cases it would be the second-largest operator, after CaixaBank.

In any case, after the transaction, the top two banks would have a high combined market share in all provinces: 78.8% in Girona, 78.7% in Tarragona, 72.5% in Barcelona, and 71.1% in Lleida. The province of Barcelona would be more affected in terms of concentration than the rest of the provinces, although it currently has the lowest level of concentration. Specifically, in Barcelona, the HHI would increase from 2,118 to 2,826, an increase of 708 points; In Girona, the number would increase from 3,098 to 3,506, an increase of 408; in Lleida, it would increase from 2,718 to 3,005, an increase of 287; and in Tarragona, it would increase from 2,816 to 3,290, an increase of 473.