The Economic Circle warns that the BBVA-Sabadell merger will accentuate the territorial imbalance in favor of Madrid.

BarcelonaThe Círculo de Economía (Economic Circle) highlights territorial balance as the main impact of the potential merger being promoted by BBVA with Banc Sabadell. This is one of the "general interest" arguments incorporated by this organization into the public consultation launched by the central government, presented this Tuesday by the Círculo's president, Jaume Guardiola, and its general director, Miquel Nadal. The entity believes that the only options that the National Commission on Markets and Competition (CNMC) should have approved to preserve free competition were either to impose the sale of part of the business in the event of a potential merger or, simply, to prevent it.

The territorial imbalance in favor of Madrid has been a concern for at least twenty-five years at the Círculo, which, at the same time, emphasizes that "territorial balance is a legal asset of general interest" that is also enshrined in the Constitution. The planned merger would represent a further step in the process of financial and business concentration in Madrid. "It means accentuating the territorial imbalance that already exists," Nadal stated. Guardiola, who was a senior executive at BBVA and CEO of Sabadell, emphasized that the Cercle's opinion is not against BBVA, which has been strongly established in Catalonia for years, nor against the CNMC, but rather "in favor of the general interest and competition."

The entity emphasizes Sabadell's special territorial ties and its strong involvement in the productive fabric of the territories in which it operates. Although BBVA has stated that it plans to maintain a dual corporate headquarters, this is not a condition imposed by the National Commission on Markets and Competition (CNMC). Furthermore, previous transactions, such as the incorporation of Banca Catalana, Unnim, and Catalunya Banc, led to its demise.

The Círculo also includes the consolidation process of the European single market, which involves cross-border mergers. The bank believes that excessive concentration in national markets could affect this process and proposes remedies such as maintaining Sabadell with its own legal personality and governance. It also calls on the government to monitor these conditions. The Círculo warns that it must be monitored to ensure that, through economic integration operations, "decision-making centers and the network of services associated with them are excessively located in a specific location." It also recalls that the banking consolidation process initiated in 2008 led to "a significant concentration of decision-making centers in Madrid."

From four to three major players

At the same time, they are demanding the full report of the CNMC's ruling, which unanimously endorsed the takeover bid. Círculo believes that competitive conditions were not preserved, especially with regard to credit conditions for SMEs and large companies. In Spain, there are only four major banks with the potential to make these bids across the country, and the transaction would reduce the number of players by 25%, from four to three, and would increase concentration in the sector. Therefore, they base their decision on a report prepared by the Catalan Competition Authority (ACCO).

The entity believes that the structural risk of the merger affects all companies, not just those that are clients of BBVA, Sabadell, or both entities. And it is a risk, they add, with no time limit. The conditions imposed by the CNMC are only behavioral, being "insufficient to address the structural risk of worsening competition," they explain. They also believe it affects the banking system's ability to innovate.

In addition to reducing the number of players in the market, Sabadell's network of alliances to improve products and technology would disappear. The only way to avoid this would have been to impose divestment measures or not authorize the transaction. The Círculo advocates "a networked economy, where decision-making centers are distributed evenly among the different territories," which, in their view, "favors harmonious economic development."

The entity decided not to join a joint letter from several Catalan business and economic entities to Prime Minister Pedro Sánchez demanding that he veto the merger of BBVA and Sabadell. This group, made up of the thirteen chambers of commerce, the employers' associations Foment del Treball, Pimec, Pimec Autónomos and Cecot, Feria de Barcelona, ​​​​Barcelona Global, FemCat, the RACC (National Association of Economists), and the College of Economists, called for participation in an unprecedented public consultation launched by the central government aimed at gathering opinions on issues that would be affected by a ruling from the CNMC.

The deadline for participation ended last Friday. The Ministry of Economy now has until Tuesday of next week to decide whether to submit the file to the Council of Ministers, which will then have another thirty business days to agree on whether to impose further conditions on the merger promoted by BBVA. The bank chaired by Carlos Torres Vila announced that it was not participating in this process "because there are no factors of general interest affected by the operation." This is a very different perspective from that of the UGT and CCOO unions, which focused on job losses—"between 7,684 and 10,567, especially for workers over fifty"—and the closure of offices. The Catalan employers' associations stated at the time that the planned merger could reduce the volume of available credit by between €54 billion (Pimec) and €70 billion (Foment del Treball).

In the collective document sent to Sánchez, the entities stated that, beyond technical considerations, there are also reasons of general interest that would justify not proceeding with the merger between the two banks. "Spain also needs banks that are close to businesses, especially smaller projects, and that find their competitive advantages in their in-depth knowledge of the business and social fabric. In our view," they continued, "the general interest of Spain includes the availability of savings and credit channels that effectively adapt to the needs of the different business segments and social groups."