Merger Control as Barrier to EU Banking Market Integration

In 2005, the President of the Bank of Italy blocked the cross-border acquisition of two Italian banks for prudential reasons and formal errors. Because it became later public that both deals were not blocked for prudential reasons, but to protect domestic banks from foreign investors. A survey of the EU Commission indicates that the misuse of supervisory powers and political interference is not only a barrier to cross-border consolidation in Italy, but in other EU countries as well. Systematic empirical evidence on the role of merger control as barrier to M&A is, however, still missing. The main problem is the lack of data on the scope for politicians and supervisors to block M&A during merger control. The main contribution of this paper is to collect this data and to construct indices on the political independence of the supervisory authorities and the transparency of merger control. The main source of information is a questionnaire that was sent to the supervisors in the 25 EU member countries between October 2006 and March 2007.