Finance

UniCredit’s pursuit of Commerzbank is a watershed moment for Europe

Published

3 months ago

September 26, 2024

A man shelters from the rain under an umbrella as he walks past the Euro currency sign in front of the former European Central Bank (ECB) building in Frankfurt am Main, western Germany.

Kirill Kudryavtsev | Afp | Getty Images

European banking’s latest takeover battle is widely regarded as a potential turning point for the region — particularly the bloc’s incomplete banking union.

Italy’s UniCredit has ratcheted up the pressure on Frankfurt-based Commerzbank in recent weeks as it seeks to become the biggest investor in Germany’s second-largest lender with a 21% stake.

The Milan-based bank, which took a 9% stake in Commerzbank earlier this month, appears to have caught German authorities off guard with the potential multibillion-euro merger.

“The long-discussed move by UniCredit, Italy’s number one bank, to seek control of Germany’s Commerzbank is a watershed for Germany and Europe,” David Marsh, chairman of London-based OMFIF, an organization that tracks central banking and economic policy, said Tuesday in a written commentary.

Whatever the outcome of UniCredit’s swoop on Commerzbank, Marsh said the episode marks “another huge test” for German Chancellor Olaf Scholz.

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The embattled German leader is firmly opposed to the apparent takeover attempt and has reportedly described UniCredit’s move as an “unfriendly” and “hostile” attack.

“The dispute between Germany and Italy over UniCredit’s takeover manoeuvres – branded by Scholz an unfriendly act – threatens to inflame relations between two of the Big Three member states of the European Union,” Marsh said.

“A compromise could still be found,” he continued. “But the hostility developing in Italy and Germany could scupper any meaningful steps towards completing banking union and capital markets integration, which all sides say is necessary to drag Europe out of its malaise.”

What is Europe’s banking union?

Designed in the wake of the 2008 global financial crisis, the European Union’s executive arm in 2012 announced plans to create a banking union to make sure that lenders across the region were stronger and better supervised.

The project, which became a reality in 2014 when the European Central Bank assumed its role as a banking supervisor, is widely considered to be incomplete. For instance, the lack of a European deposit insurance scheme (EDIS) is one of a number of factors that has been cited as a barrier to progress.

European leaders, including Germany’s Scholz, have repeatedly called for greater integration in Europe’s banking sector.

OMFIF’s Marsh said Germany’s opposition to UniCredit’s move on Commerzbank means Berlin “now stands accused of favouring European banking integration only on its own terms.”

A spokesperson for Germany’s government did not immediately respond when contacted by CNBC for comment.

The logo of German bank Commerzbank seen on a branch office near The Commerzbank Tower in Frankfurt.

Daniel Roland | Afp | Getty Images

Hostile takeover bids are not common in the European banking sector, although Spanish bank BBVA shocked markets in May when it launched an all-share takeover offer for domestic rival Banco Sabadell.

The head of Banco Sabadell said earlier this month that it is highly unlikely BBVA will succeed with its multi-billion-euro hostile bid, Reuters reported. And yet, BBVA CEO Onur Genç told CNBC on Wednesday that the takeover was “moving according to plan.”

Spanish authorities, which have the power to block any merger or acquisition of a bank, have voiced their opposition to BBVA’s hostile takeover bid, citing potentially harmful effects on the county’s financial system.

Mario Centeno, a member of the European Central Bank’s Governing Council, told CNBC’s “Street Signs Europe” on Tuesday that European policymakers have been working for more than a decade to establish a “true banking union” — and continue to do so.

The unfinished project means that the intervention framework for banking crises continues to be “an awkward mix” of national and EU authorities and instruments, according to Brussels-based think tank Bruegel.

ECB's Centeno on banking consolidation in Europe

Asked whether comments opposing banking consolidation from leading politicians in both Germany and Spain were a source of frustration, the ECB’s Centeno replied, “We have been working very hard in Europe to bring [the] banking union to completion. There are still some issues on the table, that we all know.”

What happens next?

Thomas Schweppe, founder of Frankfurt-based advisory firm 7Square and a former Goldman mergers and acquisitions banker, said Germany’s decision — intentional or otherwise — to sell a small 4.5% stake to UniCredit earlier this month meant the bank was now “in play” for a potential takeover.

“I think we are, you know, proposing a European banking landscape and also in Germany, they are a proponent of strong European banks that have a good capital base and are managed well,” Schweppe told CNBC’s “Squawk Box Europe” on Wednesday.

“If we mean this seriously, I think we need to accept that European consolidation also means that a German bank becomes the acquired party,” he added.

Asked for a timeline on how long the UniCredit-Commerzbank saga was likely to drag on, Schweppe said it could run for months, “if not a year or more.” He cited a lengthy regulatory process and the need for talks between all stakeholders to find a “palatable” solution.

Finance

Treasury delays deadline for small businesses to file new BOI form

Published

12 hours ago

December 26, 2024

Business Finance News

Janet Yellen, U.S. Treasury secretary, on a tour of the Financial Crimes Enforcement Network (FinCEN) in Vienna, Virginia, on Jan. 8, 2024.

Valerie Plesch/Bloomberg via Getty Images

The U.S. Treasury Department has delayed the deadline for millions of small businesses to Jan. 13, 2025, to file a new form, known as a Beneficial Ownership Information report.

The Treasury had initially required many businesses to file the report to the agency’s Financial Crimes Enforcement Network, known as FinCEN, by Jan. 1. Noncompliance carries potential fines that could exceed $10,000.

This delay comes as a result of legal challenges to the new reporting requirement under the Corporate Transparency Act.

The rule applies to about 32.6 million businesses, including certain corporations, limited liability companies and others, according to federal estimates.

Businesses and owners that didn’t comply would potentially face civil penalties of up to $591 a day, adjusted for inflation, according to FinCEN. They could also face up to $10,000 in criminal fines and up to two years in prison.

However, many small businesses are exempt. For example, those with over $5 million in gross sales and more than 20 full-time employees may not need to file a report.

Why Treasury delayed the BOI reporting requirement

The Treasury delayed the compliance deadline following a recent court ruling.

A federal court in Texas on Dec. 3 had issued a nationwide preliminary injunction that temporarily blocked FinCEN from enforcing the rule. However, the 5th U.S. Circuit Court of Appeals reversed that injunction on Monday.

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“Because the Department of the Treasury recognizes that reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect, we have extended the reporting deadline,” according to the FinCEN website.

FinCEN didn’t return a request from CNBC for comment about the number of businesses that have filed a BOI report to date.

Some data, however, suggests few have done so.

The federal government had received about 9.5 million filings as of Dec. 1, according to statistics that FinCEN provided to the office of Rep. French Hill, R-Ark. That figure is about 30% of the estimated total.

Hill has called for the repeal of the Corporate Transparency Act, passed in 2021, which created the BOI requirement. Hill’s office provided the data to CNBC.

“Most non-exempt reporting companies have not filed their initial reports, presumably because they are unaware of the requirement,” Daniel Stipano, a partner at law firm Davis Polk & Wardwell, wrote in an e-mail.

There’s a potential silver lining for businesses: It’s “unlikely” FinCEN would impose financial penalties “except in cases of bad faith or intentional violations,” Stipano said.

“In its public statements, FinCEN has made clear that its primary goal at this point is to educate the public about the requirement, as opposed to taking enforcement actions against noncompliant companies,” he said.

Certain businesses are exempt from BOI filing

The BOI filing isn’t an annual requirement. Businesses only need to resubmit the form to update or correct information.

Many exempt businesses — such as large companies, banks, credit unions, tax-exempt entities and public utilities — already furnish similar data.

Businesses have different compliance deadlines depending on when they were formed.

For example, those created or registered before 2024 have until Jan. 13, 2025, to file their initial BOI reports, according to FinCEN. Those that do so on or after Jan. 1, 2025, have 30 days to file a report.

There will likely be additional court rulings that could impact reporting, Stipano said.

For one, litigation is ongoing in the 5th Circuit, which hasn’t formally ruled on the constitutionality of the Corporate Transparency Act.

“Judicial actions challenging the law have been brought in multiple jurisdictions, and these actions may eventually reach the Supreme Court,” he wrote. “As of now, it is unclear whether the incoming Trump administration will continue to support the Government’s position in these cases.”