The Spanish government has expressed its disapproval of BBVA's hostile takeover attempt for its smaller rival, Sabadell.

Economy Minister Carlos Cuerpo stated on Thursday that the government considers the proposed merger between the two banks would have potentially detrimental effects on the Spanish financial system, impacting jobs and customers.

Cuerpo told TVE: "We are currently, both in form and substance, rejecting this operation as a consequence of those potential negative effects it could have. We have the final authority when it comes to authorising the merger by absorption of Sabadell by BBVA, and that is where we would come in to make this assessment."

Under Spanish law, the Economy Ministry holds the power to block any bank merger or acquisition. The government has a six-month window to decide after consulting with regulators, including the Bank of Spain and the securities regulator CNMV.

BBVA, Spain's second-largest bank, on Thursday presented a €12.23 billion ($13.11 billion) takeover bid directly to Sabadell's shareholders after Sabadell's board rejected the initial proposal earlier this week on the same terms.

While BBVA Chairman Carlos Torres expressed confidence that the government would recognise the value of the transaction, stating that the combined entity would boost the Spanish economy by generating a higher tax base and creating a stronger player in Europe, concerns have been raised from various quarters.
In Catalonia, the region that would be most affected due to the high number of overlapping branches, regional elections are scheduled for Sunday. Unions and local parties have voiced apprehensions about potential job losses and branch closures resulting from the merger.

The CCOO labour union stated that a hostile takeover raises more concerns than the previous proposal and called on regulators to implement measures to prevent monopolistic practices. Should the takeover proceed, CCOO demanded written labour guarantees and urged supervisors and regulators to move from statements to concrete antitrust actions.

Carles Puigdemont, the separatist party Junts candidate for president of Catalonia, advocated for stopping the takeover, accusing BBVA of pursuing a strategy to "liquidate the Catalan banking sector, to the detriment of users and the country."

The backdrop of this takeover bid is further complicated by the relocation of legal headquarters by Sabadell and CaixaBank from Catalonia in 2017, following the failed secession attempt led by Puigdemont, fearing the region's potential exit from the European Union.

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