UniCredit, the second-largest bank in Italy, has gained approval from the European Central Bank for its 14 billion euro all-stock proposal to acquire Banco BPM, a smaller competitor. The bid is part of a series of aggressive takeover attempts within the Italian banking sector, which has rebounded from the financial crisis of 2008-2012 to achieve significant profits recently due to favorable interest rates.

UniCredit will finalize the share issuance to finance the bid after its shareholders green-lighted the move on Friday, with the board set to give its final approval on Sunday. The next step is for the Italian market regulator Consob to clear the offer document, expected to happen in the coming week, allowing UniCredit to proceed with the tender offer.

It is anticipated that the bank will delay the launch of the tender offer by about a month, as per a source familiar with the process. CEO Andrea Orcel, known for his expertise in dealmaking and strategic investments, has emphasized that shareholder returns will not be compromised in pursuit of a merger.

UniCredit made the bid for Banco BPM shortly after its rival's move to acquire fund manager Anima Holding. The cost of the Anima acquisition for BPM increased after the ECB expressed concerns about the 'Danish Compromise,' a set of favorable capital regulations. Despite this setback, BPM intends to proceed with the Anima deal, which was approved by shareholders even without the compromised benefits.

UniCredit has the option to withdraw its bid if the Danish Compromise benefits are not secured, and will closely monitor BPM's financial performance and capital levels to make an informed decision. UniCredit highlighted the risks involved by offering only a minimal premium to BPM's shareholders, as demonstrated by the recent challenges faced by the Anima acquisition.