Italy's Regulatory Shift in Banking Consolidation: A New Era for Private Sector-Led Growth in European Banking

Italy's banking sector has long been a battleground for regulatory intervention, with the government's use of “Golden Power” to block or condition mergers shaping the trajectory of the industry. However, a subtle but significant shift is emerging. While high-profile cases like the stalled UniCredit-Banco BPM merger highlight the government's aggressive use of Golden Power, recent consolidations such as BPER Banca's acquisition of Banca Popolare di Sondrio (BPS) and Banco BPM's purchase of Anima Holding demonstrate a more hands-off approach. This duality signals a strategic recalibration by Italian regulators—one that could unlock new opportunities for private sector-led growth in European banking.

The Golden Power Paradox

Italy's Golden Power mechanism, designed to protect national security and strategic assets, has been wielded increasingly in the past year. The UniCredit-BPM merger, valued at €14 billion, became a flashpoint when the government imposed conditions requiring UniCredit to exit Russian operations, maintain loan-to-deposit ratios, and preserve project finance levels. While the government defended these as necessary for stability, the European Commission raised concerns about conflicting with EU capital freedom rules. The deal's collapse underscores the risks of overreliance on Golden Power, which can create regulatory uncertainty and deter institutional investors.

Yet, the same government has chosen not to intervene in other consolidations. BPER Banca's acquisition of BPS, approved by the ECB and antitrust authorities, proceeded without Golden Power scrutiny. This merger, expected to generate €290 million in cost synergies by 2027, exemplifies how regulatory clarity and strategic alignment can facilitate consolidation without political interference. Similarly, Banco BPM's acquisition of Anima Holding—a €2.5 billion asset management firm—was completed without conditions, signaling confidence in the private sector's ability to navigate complex markets.

A Strategic Rationale for Restraint

Why the selective use of Golden Power? The answer lies in Italy's broader economic priorities. The government, led by Economy Minister Giancarlo Giorgetti, has emphasized reducing systemic risk and strengthening domestic banks. However, its approach appears to distinguish between mergers that align with these goals and those perceived as destabilizing. For instance, BPER's BPS acquisition strengthens regional banking infrastructure and enhances service offerings, aligning with Giorgetti's vision of a “banking union” that prioritizes local economies. In contrast, the UniCredit-BPM deal raised concerns about concentrated power and potential exposure to geopolitical risks.

This nuanced strategy reflects a shift from blunt intervention to targeted oversight. The 2024 Annual Report on Foreign Direct Investment (FDI) notes that Golden Power filings increased by 15% year-on-year, but only 30 transactions faced conditions. This suggests regulators are applying the tool more selectively, reserving it for cases where national interests are clearly at stake. For investors, this creates a more predictable environment, particularly in sectors like regional banking, where consolidation is likely to continue unimpeded.

Opportunities in a Post-Golden Power Landscape

The non-exercise of Golden Power in certain mergers opens avenues for private sector-led growth. BPER Banca's BPS deal, for example, has created a regional banking giant with 2 million customers and 400 Lombardy branches. The transaction's success—despite a 5.5% valuation discount—demonstrates that investors are willing to accept short-term costs for long-term strategic gains. Similarly, Banco BPM's Anima acquisition diversifies its revenue streams, insulating it from interest rate volatility—a critical advantage in an era of potential monetary easing.

For investors, these cases highlight the importance of monitoring regulatory trends. Banks that have successfully navigated consolidation without Golden Power constraints—such as BPER and Banco BPM—are likely to outperform peers in a more stable regulatory environment. Conversely, institutions entangled in politically sensitive deals (e.g., UniCredit) may face prolonged uncertainty, deterring long-term investment.

The European Commission's Role and Future Outlook

The European Commission's scrutiny of Golden Power interventions adds another layer of complexity. The UniCredit-BPM case could trigger an infringement procedure if Italy fails to address concerns about EU law violations. This underscores the need for Italian regulators to balance national interests with European integration. However, the government's revised Golden Power decree, expected in 2025, may address these issues by clarifying the scope of strategic asset protections.

For now, the contrast between intervened and non-intervened deals suggests a pragmatic approach. The government appears to be testing the boundaries of its authority while avoiding overreach that could alienate the EU. This measured strategy could pave the way for a more harmonized regulatory framework—one that supports consolidation while respecting European market principles.

Investment Advice

1. Focus on Regional Banks: Prioritize regional institutions like BPER Banca and Banco BPM, which are likely to benefit from continued consolidation without regulatory friction. These banks offer exposure to Italy's banking transformation and are better positioned to capitalize on cost synergies.
2. Monitor Golden Power Filings: Track the 2024 FDI report and upcoming Golden Power amendments to gauge the government's priorities. Sectors with lower intervention rates (e.g., asset management) may present untapped opportunities.
3. Diversify Across European Markets: While Italy's regulatory environment is evolving, broader European trends—such as the ECB's emphasis on financial resilience—suggest that cross-border mergers will remain critical. Consider portfolios that include Italian regional banks and pan-European consolidators.

Conclusion

Italy's regulatory approach to banking consolidation is at a crossroads. The selective non-exercise of Golden Power in recent years signals a strategic shift toward empowering the private sector while reserving intervention for cases of genuine national risk. For investors, this duality creates a unique opportunity: to participate in a sector where regulatory clarity and market-driven consolidation are converging. As Italy's banking landscape continues to evolve, the focus will shift from political theater to pragmatic, results-oriented growth—a trend that could redefine European banking in the years ahead.