On March 23, 2021, after an investigation spanning around four months, the Spanish Markets and Competition Commission (CNMC) authorized the merger between Bankia, S.A. (Bankia) and Caixabank, S.A. (Caixabank) in the first phase, subject to compliance with some commitments offered by the parties.
The aim of the transaction is to create the leading bank in Spain’s banking services market, specifically in retail banking, by merging the country’s third and fourth largest financial institutions. As well as operating in the banking services market (retail banking, corporate banking, investment banking and factoring market), the institutions are also active in the card issue, PoS terminal, ATMs, insurance production and distribution, and pension plans and funds management markets.
After carefully analyzing the implications of the transaction in all these markets both nationally and provincially, the CNMC has concluded that the transaction does not cause concern in the markets unrelated to banking services as it does not involve a significant change in the market’s competitive structure prior to the transaction and there is sufficient competitive pressure in all of them.
Retail banking market
That being said, in the retail banking market, the CNMC has focused on the high concentration indices generated by the transaction and has identified factors that could impact effective competition in some areas.
In its investigation, the CNMC has identified all the zip codes of the branches in which the parties’ activities overlap, and it has analyzed the market shares and number of competitors in the most affected local environments, taking a distance of 1.5 km from the merged entity’s branches as a reference.
As a result of this analysis, the CNMC has identified two scenarios in a total of 86 zip codes where there could be zero or reduced competitive pressure, granting the resulting entity excessive market power that could negatively impact consumers.
- The first scenario relates to 21 towns in which the resulting entity has a monopoly as it is the only bank in the surrounding 1.5 km. Therefore, there is a risk of financial exclusion if branches of the entities involved in the transaction were to close.
- The second scenario arises in 65 towns in which the resulting entity faces competition from a single competitor, posing a potential risk of deterioration in current customers’ commercial terms.
The CNMC has also emphasized the ATMs market, particularly in towns in which Bankia’s position in this market is significant, as the transaction could entail breaking the agreements Bankia held with other entities (ING, Banco Sabadell and entities of the Euro6000 network), therefore denying access to BANKIA’s network of ATMs in the terms in which they had been doing so and raising the fees.
The commitments
To resolve the problems identified by the CNMC, the parties have proposed a series of commitments to avoid the risks of financial exclusion, possible fee increases and tighter commercial terms, a well as breaking the existing agreements Bankia and ING hold with Euro6000 and Banco Sabadell on ATMs.
With regard to the risks of financial exclusion, possible fee increases and tighter commercial terms, Caixabank commits:
- Not to leave any municipality in which one of the parties (or both) currently operates and there is no competing branch, except in exceptional cases subject to the CNMC’s prior authorization;
- Not to alter the current terms of the products of Bankia’s customers in the 21 towns where there is a monopoly for a period of 3 years;
- To offer its products in the other 65 towns in materially equal — and not worse — terms to those already offered by Caixabank in the three zip codes with greatest exposure of Caixabank to competitors, for 3 years;
- Not to raise fees for Bankia customers in the 86 towns where transactions can currently be carried out over the counter for free, again for 3 years;
- To communicate the closure of the transaction and the modifications to products to Bankia’s customers with notice, particularly in relation to: (i) the new fees applicable; (ii) the products offered to Caixabank’s customers that are equivalent or better than the products contracted at Bankia; (iii) the period for modifications to come into effect: 60 days (individuals) or 30 days (other customers); (iv) their consumer rights in view of a change in terms; and (v) the customer’s freedom to change bank; and
- To communicate to Bankia’s customers who meet the eligibility requirements for Caixabank’s social account that they can benefit from the terms of this account, and to maintain that social account or an equivalent product.
Second, with regard to the risk of breaking the agreements between Bankia and ING, Euro6000 and Banco Sabadell for the use of Bankia’s ATMs, Caixabank commits to:
- Offer the customers of those entities access to the ATMs currently owned by Bankia without changing the financial terms, for 18 months; and
- If Bankia ATMs are closed as a result of the transaction, to give the customers of those entities access to the nearest Caixabank ATM to the closed Bankia ATM. Caixabank will duly signpost the affected ATMs to facilitate their identification.
Finally, regarding the common minority shares of Caixabank and Bankia, Caixabank commits to comply with the bylaw obligations regarding divestment of the shareholding exceeding the limit envisaged as a result of the transaction, waiving the corresponding voting rights until the divestment is complete.
Conclusion
The CNMC believes that these commitments are adequate and sufficient to solve the competition problems that the transaction could present, insofar as they neutralize or mitigate the risks identified. The CNMC will also ensure that Caixabank complies with them, and Caixabank will be required to inform the CNMC that the commitments have been complied with in the agreed periods.
You can find the CNMC’s file: C/1144/20: Caixabank/Bankia, and the list of the 86 zip codes affected here.