FRANKFURT, Germany: The European Central Bank is leaning toward approving UniCredit's proposed takeover of Germany's Commerzbank, according to an internal document outlining the regulator's preliminary assessment of the deal.

The document, seen by Reuters, found "no grounds to object" to the Italian bank's bid but said integration would likely be "challenging and long-lasting." It also said German supervisors want UniCredit to develop "a mitigation strategy" to build support within Commerzbank, along with stronger checks and balances at UniCredit.

The document was presented last month to the ECB's Supervisory Board, which brings together regulators from the central bank and national authorities. The board considers the views of national supervisors on takeover proposals before a final decision is ratified by the ECB's Governing Council.

Spokespeople for the ECB, Germany's financial regulator BaFin, UniCredit and Commerzbank declined to comment on the document. It said the application remained incomplete and that a final review is expected in September or October.

UniCredit has built a roughly 48% stake in Commerzbank through a €43 billion ($49.60 billion) hostile bid. The offer has faced resistance from Commerzbank's management, employees and the German government, although some opposition has recently softened.

ECB approval would remove the main regulatory hurdle to the transaction.

The document also provides details of concerns raised by BaFin over UniCredit's governance and conduct during the takeover process.

According to the document, BaFin cited what it described as "aggressive and partially intransparent behaviour" by UniCredit. The regulator also raised concerns about "weaknesses in checks and balances" and called for stronger governance.

BaFin said the hostile nature of the bid had alienated Commerzbank's management, staff, unions and political stakeholders, and that UniCredit would need a credible strategy to rebuild trust.

UniCredit declined to comment on BaFin's views.

The ECB acknowledged many of the same challenges but concluded they did not justify blocking the transaction.

It said concerns over UniCredit's board had already been addressed through supervisory measures, including more detailed board minutes and stronger oversight. The ECB also said anti-money laundering shortcomings at UniCredit's German subsidiary were being remedied.

The document highlighted Commerzbank's size and complexity, cultural differences between the two banks and tensions resulting from the hostile bid, warning that integration would involve material execution risks.

The ECB also questioned UniCredit's assumption that it could maintain a 12.5% capital ratio after acquiring a 51% stake, while noting that such scrutiny is routine and does not signal opposition. It added that UniCredit's integration plans lacked sufficient detail when the presentation was made last month. A full application was submitted in late July.