BRUSSELS (Reuters) – EU member states will have to follow stricter rules in assessing bank mergers and hand over documents to Brussels under changes to banking law proposed by the European Commission on Tuesday to stamp out protectionism. Current European Union rules allow regulators to block a deal on «prudential» grounds – that is, if they think the target company would be put at risk. EU officials see this condition as too vague and open to abuse by national regulators who want to fend off foreign takeovers. The Commission is proposing stricter conditions under which national watchdogs could seek to veto or amend deals. «These new rules mean that supervisory authorities will have to be clear, transparent and consistent when assessing cross-border mergers and acquisitions,» Internal Market Commissioner Charlie McCreevy told reporters. «They leave no room for political interference or protectionism… Consolidation should be decided by the market and only by the market,» McCreevy said. He wants more cross-border mergers to create bigger banks to compete with US rivals on a global scale and create a more efficient single financial market. The EU launched legal action against Italy in December after Dutch bank ABN AMRO complained that the Bank of Italy favored a rival Italian bidder for Banca Antonveneta. Bank of Italy Governor Antonio Fazio later resigned after criticism of his handling of ABN AMRO’s bid. McCreevy has also clashed with Poland over its attempts to block a merger of the Polish subsidiaries in an Italian-German banking merger. The Commission proposed five conditions for assessing deals: – reputation of the proposed acquirer; – reputation and experience of any person that may run the resulting institution or firm; – financial soundness of the proposed acquirer; – compliance with relevant EU directives; – risk of money laundering and terrorism financing. The Commission also proposes cutting from three months to 30 days the period a national watchdog would have to assess a merger, allowing the supervisory authority to «stop the clock» only once under clear conditions. The European Banking Federation, which represents the EU’s commercial banks, said merger supervision would improve. «As a result it can be expected that the current, informal barriers would disappear, thus strengthening the feasibility and pace of cross-border mergers and acquisitions,» it said. McCreevy ruled out a single European market watchdog, because it would have no chance of being adopted by member states.