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

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.

Italian lender UniCredit says its offer for domestic rival Banco BPM is separate from its pursuit of German bank Commerzbank.

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.

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,