The proposed merger between BBVA and Banc Sabadell is now in the hands of the Spanish government, led by Prime Minister Pedro Sánchez.

The analysis conducted by the National Commission for Markets and Competition (CNMC) is approaching completion, with sources indicating that the resolution of Phase II is nearly ready.

None of the significant commitments proposed at the conclusion of Phase I have been imposed, largely disregarding many of Sabadell’s arguments.

Recently, the CNMC confirmed that its analysis remains ongoing and that the procedure, accessible only to interested parties, continues to unfold.

However, informed sources suggest that a resolution could be issued within weeks, pending the outcomes of the general meetings of both entities involved.

Should the CNMC approve BBVA's commitments to maintain certain commercial conditions for clients and specific branch locations, the matter will then pass to the Council of Ministers.

This council may either reinforce the CNMC's conditions, impose new requirements, or approve them as they stand.

The Spanish government may have grounds to tighten the conditions based on the necessity of ensuring territorial balance, a point emphasized by Prime Minister Sánchez last month regarding the merger's implications for this balance.

Speculation exists that the government might consider a temporary ban on banking mergers to protect local markets and maintain competition.

Furthermore, the Executive may choose to levy additional requirements for the merger's execution, potentially involving the divestiture of certain portions of the bank.

Such actions could be justified by the need for territorial cohesion or the promotion of financial inclusion.

The CNMC’s forthcoming report from Phase II, reportedly nearing finalization, appears to align closely with the conditions from Phase I, failing to address Sabadell's calls for structural rather than behavioral commitments aimed at ensuring competition.

Sabadell has argued that in regions like Catalonia and Valencia, the merger would reduce the number of major banking competitors from four to three, prompting the bank to propose the sale of its credit card and SME operations in these territories to an unaffiliated third party, excluding major competitors like Santander and CaixaBank.

Reports indicate that the CNMC employed a similar methodology to that used in the merger between CaixaBank and Bankia, imposing mostly behavioral conditions rather than structural changes.

For example, the CNMC has suggested that the merged entity must maintain current contractual arrangements for SMEs for a period that could extend to three years.

However, this approach does not necessarily guarantee an increase in competition, as it results in the consolidation of another large bank in the market.

The assessment by the CNMC reportedly was not especially intricate, with the commission rejecting allegations from 79 entities—including trade associations and labor unions—that argued they would be negatively affected by the merger.

Consequently, this streamlined the timeline by restricting which stakeholders were allowed to submit comments on the merger, limiting this to Sabadell and the competition authorities from Catalonia and Valencia.

In response to the CNMC's decisions, the employers' association Foment has filed an appeal with the National Court, which is currently under review.

This organization, led by Josep Sánchez Llibre, has also requested interim measures to allow the submission of its arguments.

Additionally, Pimec, representing small and medium enterprises and led by Antoni Cañete, has filed its appeal with the court.

The CNMC has maintained that the legal proceedings do not impede the progress of the current case.