EU plans to ease banking mergers

The EU wants more finance mergers to better compete with the US

The European Commission has unveiled plans aimed at facilitating cross-border mergers between banks.

Existing rules allow member states to block proposals if they think a merger threatens the target firm, but the EU says the rules are prone to abuse.

The proposals would make criteria for objecting harder and "leave no room for political interference", said the EU.

The decision follows rows in 2005 when Italy's central bank was seen to stop cross border bids for Italian banks.

This created a conflict between Italy's then central banking governor Antonio Fazio, and the European Commission.

Mr Fazio was seen trying to prevent a take-over of Banca Antonveneta by ABN AMRO as well as of Banca Nazionale del Lavoro (BNL) by Spanish bank BBVA.

'Clear and transparent'

Italy is not alone. The EU had also come to blows with Poland for blocking foreign finance deals.

"These new rules mean that supervisory authorities will have to be clear, transparent and consistent when assessing cross-border mergers and acquisitions," said Charlie McCreevy, the EU's internal markets and services commissioner.

The stricter conditions would make it harder for member states to prevent takeovers of domestic banks by foreign banks simply because they disliked the idea.

A specific list of rules would spell out what national supervisory bodies can do, with clear decision-making processes to allow or block finance mergers.

As well as making the criteria for national objections more stringent, the EU wants to reduce the time during which a national watchdog can examine a merger from 3 months to 30 days.

Mr McCreevy hopes that if more finance mergers were allowed to go ahead, the EU would be able to better compete with the US.

To pass the legislation all EU member states must approve the new proposals.