UniCredit's bid risks scuppering the government's plans to form a third strong banking player alongside Intesa Sanpaolo and UniCredit through a merger of BPM with state-owned Tuscan lender Monte dei Paschi di Siena (MPS), both of which have ties with Italy's biggest fund manager, Anima Holding.

UniCredit SpA has hired Deloitte LLP to advise Italy’s second-biggest bank on its takeover bid for Banco BPM SpA, people familiar with the matter said.

UniCredit's bid for BPM also throws a spanner in the works for Italy's government, which had advanced plans for a merger of BPM with rival Monte dei Paschi di Siena which it saw as strengthening its banking sector without harming competition.

Banco BPM SpA said the takeover bid it has received from UniCredit SpA wasn’t agreed in advance and isn’t in line with its performance.

The Italian Treasury has denied a report that it is drafting an emergency decree to counter UniCredit’s (OTCPK:UNCFF)(OTCPK:UNCRY) 10B euro ($10.6B) bid for Banco BPM, Reuters reported late Friday. UniCredit made the offer for the smaller rival on Monday,

The Italian government is ready to use its special vetting powers if UniCredit's takeover bid for smaller rival Banco BPM goes against the national interest, the prime minister said on Monday. "This is a market operation