UniCredit has officially withdrawn its €14.6 billion all-share takeover bid for Banco BPM, bringing to an abrupt halt one of the most closely watched consolidation efforts in the European banking sector.
The decision, announced on Tuesday evening, follows months of legal disputes and regulatory friction between the Italian government and the European Commission, with significant implications for future cross-border banking mergers within the EU.
Collapse of a Landmark Deal
In a statement issued on 22 July, Italy’s second-largest bank cited unresolved regulatory obstacles imposed under Italy’s “golden power” regime as the principal reason for its withdrawal. These special government powers allow Rome to block or condition deals deemed to affect national security or public order.
“The normal offer process has been impacted by the Golden Power provision,” UniCredit said, adding that a 30-day suspension issued earlier in the day by Italy’s market regulator, Consob, would not resolve the uncertainty surrounding the legal scope of those government-imposed conditions.
The withdrawal marks a significant setback for a proposed merger that aimed to create a banking group with €760 billion in combined assets and €3 billion in projected annual cost synergies. The European Central Bank had already approved the transaction from a prudential standpoint, and the European Commission had conditionally cleared it subject to branch divestments. However, the deal unravelled amid a jurisdictional dispute over Rome’s additional requirements, including an obligatory exit from Russian operations and regional lending constraints.
Legal and Regulatory Conflict
The Italian government, under Prime Minister Giorgia Meloni, imposed conditions on the merger that included mandatory divestment from Russian assets by the end of 2025 and a five-year maintenance of Banco BPM’s loan-to-deposit ratio in southern Italy. These measures were justified on national security grounds. However, the European Commission argued that such conditions were disproportionate and potentially in breach of EU rules on the free movement of capital.
A partial ruling from an Italian administrative court earlier this month annulled some of the government’s conditions—such as restrictions on project financing and loan ratios—while upholding others. Despite this partial legal victory, UniCredit concluded that the remaining uncertainty rendered further pursuit of the deal untenable.
Wider Implications for European Banking
The breakdown of the UniCredit–Banco BPM merger underscores structural weaknesses in the EU’s current approach to cross-border banking consolidation. The absence of a harmonised framework means that even after ECB and Commission approval, national governments can impose politically motivated constraints that derail mergers.
The European Commission has recently expressed concern over the use of national powers to influence corporate transactions, particularly in the banking sector. In a broader signal to member states, Brussels has warned that continued political interference risks fragmenting the single market and discouraging capital flows at a time when EU banks trade at a persistent discount to their North American counterparts.
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