France’s Credit Agricole has offered the Italian government assurances that savings collected from Italian customers and invested in domestic government bonds would remain under local control, as it seeks Rome’s approval for a proposed merger between its Italian banking subsidiary and Banco BPM, two sources familiar with the matter told Reuters.
The guarantees are intended to address concerns under Italy’s so-called golden power rules, which allow the government to block acquisitions or impose conditions on transactions involving assets considered strategically important to national interests.
Credit Agricole, which controls Amundi, Europe’s largest asset manager, has announced discussions over combining Banco BPM with Credit Agricole Italia. The proposed transaction would bring together two significant banking operations in Italy, but its treatment of asset management businesses has emerged as a sensitive issue for the government.
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A central concern is Anima, the asset manager controlled by Banco BPM and a significant investor in Italian government bonds. Rome considers domestic control of institutions managing the country’s substantial pool of private savings important because those funds help support demand for sovereign debt.
Italy carries one of Europe’s largest public debt burdens and must refinance substantial amounts of borrowing every year. Maintaining a reliable domestic investor base is therefore an important consideration for policymakers, particularly when international bond markets become volatile.
One of the sources said Credit Agricole had told the government that any agreement with Banco BPM would be structured to ensure savings collected in Italy continued to be allocated domestically. The assurance is intended to reduce fears that a merger could shift control over Italian household savings and investments to foreign interests.
Credit Agricole’s proposed combination is being presented initially as a friendly offer focused on retail banking and insurance, but the future of asset management will be part of negotiations between the parties.
A Credit Agricole spokesperson said it was too early to provide details on the asset management arrangements, adding that the subject would naturally be discussed by both sides.
“At this stage, this is a friendly proposal made to Banco BPM with a view to bringing together the retail banking and insurance businesses,” the spokesperson said.
Credit Agricole already controls Amundi, whose position as Europe’s largest fund manager gives it substantial influence in the asset management industry. Banco BPM’s ownership of Anima adds another significant investment platform to the proposed combination.
The key question for the Italian government is whether the transaction could alter the ownership and investment decisions of institutions that channel Italian savings into government securities.
The proposed guarantees suggest Credit Agricole is attempting to separate the integration of banking and insurance operations from concerns about the management of domestic savings. The possibility of Rome considering those assurances sufficient will likely be determined by the final structure of the transaction and the protections negotiated around Anima and other asset management activities.
The issue has a recent precedent. Last year, Generali and France’s BPCE abandoned plans to combine their asset management businesses after failing to agree on conditions that would make the transaction viable.
The Italian government had expressed concerns about the country’s savings and Generali’s role as a major holder of Italian sovereign debt. The collapse of the proposed tie-up demonstrated how national interests surrounding asset management can complicate cross-border financial consolidation, even when the parties involved are major European institutions.
Italy’s scrutiny of the Credit Agricole proposal is rooted partly in the relationship between domestic banks, asset managers and government financing.
During the euro zone debt crisis of 2011 and 2012, support from Italian banks was important in ensuring the government could continue refinancing its debt. Domestic financial institutions remain significant participants in the sovereign bond market, while asset managers channel household and institutional savings into government securities.
This creates a policy concern when foreign acquisitions could change how those savings are managed or where they are invested. A shift in investment allocation could affect demand for Italian government bonds, although the proposed merger has not established that such a change would occur.
The banking transaction is unfolding amid mounting stress in sovereign bond markets, with France itself a focus of investor concerns. Volatility in government borrowing costs can increase the importance policymakers attach to stable domestic sources of financing.
Credit Agricole securing approval will require more than demonstrating the commercial benefits of combining its Italian operations with Banco BPM. It must also address Rome’s concerns about the relationship between private savings, asset management and the financing of public debt.
The proposed guarantees are an attempt to provide that reassurance before negotiations advance. The outcome could help determine how much room foreign banking groups have to consolidate Italian financial institutions while preserving domestic control over assets that the government considers essential to national economic security.