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September 2001). This raises the need to look towards cross-border mergers to realize economies of scale once competition policy in banking is taken seriously by either domestic or EU authorities. In this sense competition authorities become a major player in the restructuring of the sector in the EU (see Vives, 2005).

6.2. The interaction between the EU competition authority and Member States in cross border bank mergers Differently from domestic mergers, cross-border mergers do not entail substantial anticompetitive effects. However, they can - and have been - subject to regulatory and supervisory obstacles through the provisions of art. 21 of the merger regulation.

The “seminal” case in this respect was the attempt by Banco Santander Central Hispano (BSCH) to acquire joint control of the Portuguese Champalimaud group in 1999. The Portuguese authorities immediately opposed the operation, even before the parties notified it to the European Commission. Upon request by the Commission, the Minister explained that the concentration raised prudential concerns because of the lack of clarity and transparency of the resulting group, as well as other concerns related to the infringement of procedural rules and the protection of national interests. It was made clear in the press that “a restructuring of the Portuguese banking system will be necessary and it appears (…) of good sense that, in a first phase, …this is made among national groups. Foreign groups, including BSCH, will have to compete on their own and should not perturb such a restructuring. It would be totally false to arrange the system by suddenly transferring the control of large national institutions to foreign owners” (Visão, 24 June 1999). The Commission objected these motivations by arguing that neither the procedural infringement of the parties nor the protection of national interest could be considered legitimate interests in the sense of art. 21(3) and lead to an opposing decision. In particular, the attempt of a Member State to protect national interest was clearly against financial integration and the principle of non discrimination by reason of nationality embodied in art. 12 of the Treaty. The only legitimate interest which could have been used without prior approval of the Commission was the one linked to prudential considerations, but the proposed merged was not raising any credible

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