MADRID (Reuters) -The Spanish government is set to impose additional conditions to approve BBVA's proposed 14 billion euro ($16 billion) hostile takeover of smaller rival Sabadell, newspaper La Vanguardia said on Tuesday, citing unidentified sources.

The conditions, different from those of Spain's antitrust watchdog when it cleared the deal with remedies, would include keeping Sabadell's management structure and maintaining the size of the two banks' payrolls, La Vanguardia said.

It also said the measures would affect credit policies and consumer rights.

The economy ministry, Sabadell and BBVA declined to comment.

Madrid cannot stop the bid but the new conditions could make BBVA think twice.

BBVA Chairman Carlos Torres said on Monday that the lender could withdraw its offer for Sabadell if the conditions imposed were too harsh or if it were forced to accept the sale of Sabadell's British unit TSB.

Spanish newspaper El Pais also said the government would toughen conditions on lending to small companies and prevent drastic job cuts.

The government has so far opposed a deal that was announced at the end of April 2024 on concerns it may lead to job losses.

On Tuesday Bank of Spain Governor Jose Luis Escriva said that this process had been "excessively long" and that shareholders should be given the opportunity to decide on such deals.

Escriva also suggested there could possibly be room for further consolidation in the sector. Spain does not have the most concentrated banking system in Europe, but it is not at the lowest level of concentration either, he said.

The five largest banks in Spain control 70% of the market after a wave of mergers left the sector with 10 lenders, down from 55 before the 2008 financial crisis.

(Reporting by Jesús AguadoEditing by Emelia Sithole-Matarise and David Goodman)