European Commission Internal Market Commissioner Charlie McCreevy has criticised attempts by national banking authorities to favour national champions against foreign bidders and said that greater banking consolidation is needed.

His remarks, delivered to the European Banking Committee on Tuesday, come as Spanish bank BBVA and Dutch financial group ABN Amro are challenging Italy's perceived reluctance to allow foreign banks to take over Italian ones.

The two banks said last week that they are preparing parallel takeover offers for Italy's Banca Nazionale del Lavoro and Banca Antonveneta respectively, the first ever attempt to carry out cross-border mergers with Italian banks.

"Some authorities still favour 'national champions' against foreign takeovers. Most national authorities remain domestically minded," Mr McCreevy, the EU's top financial rule-maker said.

"So far there have been very few cross-border mergers... What we politely call 'political intervention mechanisms' have not disappeared," he told the EU advisory committee.

EU financial supervisory authorities or national central banks have the power to block foreign takeovers if they believe these pose a threat to a country's financial stability.

The commission believes this argument is sometimes used to deter transnational bank mergers.

Mr McCreevy noted that there are only a few banking groups of a European scale and called for greater consolidation of the banking sector in the EU.

In his speech, Mr McCreevy made no specific reference to banking developments in Italy, but his spokesman, Oliver Drewes, said on Tuesday that Mr McCreevy is closely monitoring the situation and is ready to intervene if Italy acts in a protectionist way.

Analysts believe the parallel takeover action by BBVA and ABN Amro could open the door to greater banking consolidation in Italy and beyond if the banks manage to win over the Bank of Italy, which assesses the financial solidity of bids. - (Reuters)