The European Commission has sent Spain a legal warning over its move to block a banking merger between BBVA and Banco Sabadell, a deal that would create one of the region’s largest lenders.

Warning comes as European Commission pushes for more bank mergers to boost European financial sector’s fire power.

The European Commission officially challenged the Spanish government on Thursday over its attempts to hinder Spanish bank BBVA's hostile bid for smaller rival Sabadell .

The EU said Spanish laws granting the power to intervene in banking deals undermined the ECB and restricted the bloc’s freedoms of establishment and capital movements.

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By Elena Vardon The European Union began proceedings against Spain over its intervention in banking mergers after the government blocked the legal combination of BBVA and Sabadell for at least ...