ECB will evaluate banks' insurance holdings on case by case basis, potentially reducing capital costs.

From Investing.com: 2024-12-17 08:06:28

The European Central Bank will consider banks’ insurance holdings on a case by case basis, reducing capital costs for deals like BNP Paribas’ bid for AXA IM and Banco BPM’s offer for Anima. The Danish compromise allows acquisition of fund managers at a lower regulatory capital hit, sparking potential mergers in Europe’s financial sector.

An extensive interpretation of the Danish compromise is crucial for proposed deals, leading to a consultation over options and discretions in EU law. The compromise, introduced during the Danish EU presidency, could make the cost of acquisitions cheaper for banks with insurance businesses, pending ECB approval.

BNP Paribas plans to acquire AXA IM through its insurance business, while Banco BPM pursues Anima through its insurance unit. Without the Danish compromise, the 5-billion-euro AXA IM deal would cost BNP Paribas 65 basis points of capital instead of 25 bps, according to Mediobanca Securities analyst Andrea Filtri.

The EU parliament approved regulation to make the Danish compromise permanent, allowing banks to risk-weigh their insurance investments instead of deducting them from capital. The ECB has the final say on applying the favourable treatment to insurance businesses held by banks and assets acquired through their insurance units, potentially opening new horizons for M&A deals.



Read more at Investing.com: ECB to apply Danish compromise on insurers case by case, says Buch By Reuters