Caixabank and Bankia in talks over a possible merger

Two of Spain's biggest banks, Caixabank and Bankia, are in talks over a possible merger, as confirmed by both financial institutions.

Although both clarify that no deal has been reached, it is understood that negotiations are well underway, after both boards of directors have already greenlighted the operation.

In a statement on Thursday evening, Caixabank explained that "a confidentiality agreement has been signed as to exchange information" and assess a possible merger.

If the operation is successful, the new entity would be the biggest in Spain in terms of total assets.

According to Statista, Caixabank counted 355 billion euros in assets in 2019, while Bankia had 208 billion euros.

Spain's economic affairs ministry explained that a team in the Fund for Orderly Bank Restructuring (FROB) – the public body managing the resolution processes of credit institutions and investment firms – is "permanently" assessing the conditions of the market in order to "protect the general interest," as the Spanish government owns 60% of Bankia's shares.

Caixabank is Catalan in origin, but following the 2017 independence push and ensuing political uncertainty, moved its headquarters outside of Catalonia days after the referendum.

Catalan vice president and economy minister Pere Aragonès said his focus will be on ensuring that jobs are kept in any potential merger between the entities, as he says the deal "could lead to problems" by reducing competition. 

Aragonès says this would mean "more difficulties" in accessing financing because the banking market would be concentrated into just "a few hands."