The Portuguese Central Bank have intervened again in the friendly crossholding between BSCH and Mundial Confianca. In perhaps the strangest of all the decisions, it announced for 'prudential reasons' the restriction in the combined holdings of BSCH & Mundial Confianca in any of the banks currently controlled by Mundial Confianca to 10%.
Prudential reasons are the only reason Central Banks are supposed to intervene in M&A activity amongst banks which are based within the EU.
The Portuguese government also failed to respond with an explanation of its previous actions by a deadline of Tuesday midnight set by the European Commission. It merely stated that it would explain later and asked people not to judge before they had heard the explanation.
With the EC keen to use this as a test case to mark the enforcement of rules widely flouted in the past it would seem hard to see how the Portuguese government can win. Especially with regard to the latest decision on 'prudential grounds' (the earlier penalties were linked to other regulations). It leaves the question : Will the deal have any commercial value by the time any enforcement action or penalties are applied by the EU? The European Court of Justice is the ultimate appeal court for such cases. It would be most unlikely to hear such a case before the end of 2001.
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