UniCredit Faces Regulatory Hurdles in €45 Billion Banco BPM Takeover

UniCredit SpA has announced that it will reassess its next steps in the pursuit of Banco BPM SpA following a recent court ruling that struck down some conditions imposed on the takeover. The Italian court's decision has lifted certain demands, such as the requirement to maintain a specific loan-to-deposit ratio for five years, while upholding others, including the necessity for UniCredit to exit its Russian operations. This partial victory for UniCredit comes as the bank navigates the complex regulatory landscape surrounding its €45 billion takeover bid.

The court's ruling has left UniCredit in a delicate position. While the removal of some conditions eases the path forward, the requirement to exit Russian operations remains a significant hurdle. This condition, upheld by the court, mandates that UniCredit must secure regulatory approval from Russia, a process that could be fraught with political and legal challenges. The bank's Russian subsidiary holds substantial assets, and exiting the market involves resolving complex liabilities, including disputes over frozen projects and sanctioned gas ventures. The European Central Bank's ultimatum adds to the urgency, as failure to meet the January 2026 deadline for exiting Russia could result in severe penalties, including fines or the loss of banking licenses.

The regulatory clash between Italy's use of its "golden power" and the European Commission's authority under the EU Merger Regulation has raised profound questions about the viability of cross-border mergers in Europe. The Italian government's conditions, framed as national security measures, were challenged by the European Commission, which argued that only it has the authority to impose conditions on mergers between EU companies. The court's split decision has left UniCredit in a precarious position, as it must now navigate both geopolitical risks and regulatory uncertainties.

The broader implications of this regulatory dispute extend beyond UniCredit and Banco BPM. The EU's challenge to Italy's "golden power" sends a chilling message to banks considering mergers, as it underscores the potential for national governments to act in ways that may not align with the EU's interests. This regulatory uncertainty could deter future M&A activity and undermine the bloc's goal of fostering banking consolidation to counter weak profitability and rising geopolitical risks. The UniCredit case highlights a systemic flaw in the EU's merger rules, which were designed for free-market competition but clash with national security concerns.

For investors, the stakes are clear. Prolonged uncertainty could deter M&A activity, while the deal's success or failure will redefine UniCredit's valuation and Europe's banking landscape. The next steps for UniCredit will be crucial in determining the outcome of this high-stakes merger. The bank's CEO, Andrea Orcel, has stated that UniCredit will continue to evaluate the evolving situation and take all relevant next steps in a timely manner. The bank's ability to secure Russian approvals and a revised deal structure acceptable to EU regulators will be key factors in determining the future of this merger.