Italy Faces EU Warning Over UniCredit-Banco BPM Takeover

The European Union has issued a preliminary warning to Italy over its use of so-called "Golden Powers" to impose conditions on UniCredit SpA's planned takeover of Banco BPM SpA. The EU's executive body expressed concerns that Italy's actions may violate EU law, particularly the bloc's merger rules and provisions on the free movement of capital and prudential oversight by the European Central Bank. The EU's stance comes as a result of Italy's intervention in the proposed takeover, which it argues is necessary to protect national security and regional economic interests. However, the EU believes that Italy's actions may be protectionist in nature and could hinder the EU's push for banking sector consolidation, which is seen as crucial for enhancing the bloc's competitiveness.

The dispute between Italy and the EU highlights a broader clash over the future of European finance. Italy's government, led by Giorgia Meloni, has argued that its intervention is necessary to safeguard domestic interests and ensure access to credit for small and medium-sized enterprises (SMEs), which are vital to the country's economy and political base. In contrast, the EU sees fragmented national banking markets as a structural weakness and prioritizes cross-border consolidation to rival US financial giants. The Commission is preparing to formally warn Rome, potentially escalating the matter to the European Court of Justice if Italy maintains its position.

The outcome of this dispute could have significant implications for the future of European finance. A strong, integrated financial system is critical to funding Europe's green and digital transitions, as banks direct trillions in capital toward sustainable projects. Protectionist moves risk undermining the EU banking union and slowing investments in sustainable development by favoring local priorities over systemic efficiency. Conversely, unrestrained consolidation could erode regional support for SMEs and community-level green initiatives, highlighting the tension between scale and inclusivity in sustainable finance.

Domestically, Italy's finance ministry has signaled that it will defend its sovereignty claims in court while pressing banks to prioritize lending over shareholder returns. The outcome of this dispute could redefine rules around national intervention in strategic sectors, set precedents for future mergers, and influence capital flows critical to Europe's sustainability goals. The European Commission's warning to Italy underscores the delicate balance between national sovereignty and EU integration, as well as the importance of a cohesive approach to banking sector consolidation in the face of global competition.

UniCredit unveiled its unsolicited all-share offer for Banco BPM in November, when it became clear that the Italian government was looking to build a large banking group around the formerly bailed-out Banca Monte dei Paschi di Siena SpA. Banco BPM was seen as a potential candidate to merge with Monte Paschi. The Administrative Court of Lazio struck down some regulatory requirements imposed by the state, including the request to lower the loan-to-deposit ratio at Banco BPM and UniCredit in Italy for five years, and to not reduce the current level of Banco BPM and UniCredit’s project finance portfolio in Italy. However, the court backed the government’s order to UniCredit to exit Russia and to keep unchanged domestic investments at Banco BPM’s newly acquired asset manager Anima Holding SpA.

Despite the outcome of the Italian ruling, it’s unclear if UniCredit will still pursue a deal for Banco BPM given several of the requirements were confirmed and the expiry of the offer period on July 23. The EU's stance adds to criticism by an Italian tribunal, which struck down some regulatory requirements imposed by the state in a decision published on Saturday. The EU's warning to Italy sets up a power struggle between Brussels and Rome, with the potential for a legal wrangle that could ultimately land at the EU Court of Justice, should Italy eventually refuse to appease the concerns. Rome now has been requested to respond to the commission’s findings.