Exclusive-Credit Agricole offers Rome bond safeguards to ease BPM deal, sources say

Credit Agricole Proposes Bond Safeguards for BPM Merger Amid Italy Concerns

Credit Agricole's Merger Proposal and Italian Government Concerns

By Mathieu Rosemain and Giuseppe Fonte

PARIS/ROME, Nov 9 (Reuters) - France's Credit Agricole has offered the Italian government guarantees over customer savings invested in Italian government bonds as it seeks Rome's backing for a proposed merger between its Italian unit and Banco BPM, two sources familiar with the matter said.

Golden Power Rules and Strategic Importance

The guarantees are designed to head off Italy's so-called "golden power" rules, which allow Rome to block or set conditions on transactions deemed strategically important.

Credit Agricole — which controls Amundi, Europe's biggest fund manager — has announced talks on a merger between Banco BPM and Credit Agricole Italia.

Concerns Over Asset Management and Sovereign Debt

A key concern for Rome is Anima, the asset manager controlled by Banco BPM, which is a significant holder of Italian sovereign debt.

With a massive public debt to refinance every year, Italy sees domestic control of companies managing the country's high amount of private savings as strategically important.

Credit Agricole has told the government any deal with BPM would be designed to ensure the allocation of savings collected in Italy remained in domestic hands, one of the sources said.

Reuters could not establish what specific commitments Credit Agricole had made to the Italian government.

Asset Management Negotiations

ASSET MANAGEMENT WILL BE SUBJECT OF TALKS, CREDIT AG SAYS

A spokesperson for Credit Agricole said it was too early to say any more on asset management, which would naturally be the subject of talks between the parties.

"At this stage, this is a friendly proposal made to Banco BPM with a view to bringing together the retail banking and insurance businesses," the spokesperson added.

Banco BPM declined to comment.

Historical Context: Previous Failed Tie-Ups

The concerns echo last year's failed tie-up between Generali and BPCE. The two groups dropped plans to merge their asset management businesses, saying the conditions required to make the deal viable were absent.  

The deal collapsed after the Italian government expressed concerns over the country's savings and Generali's position as a major holder of Italian sovereign debt.

Market Background and Investor Concerns

Support from domestic banks was key to securing Italian debt refinancing during the euro zone crisis in 2011-2012, and the banking M&A is unfolding against the background of mounting stress in sovereign bond markets, with France a focus of investor concerns.

(Reporting by Mathieu Rosemain in Paris and Giuseppe Fonte in Rome; Additional reporting by Valentina Za and Andrea Mandala; Editing by Jan Harvey)