ECB strives for loophole that is seen as manager for asset manager offerings

(Bloomberg) – The European Central Bank has concluded a regulatory loophole as a potential catalyst for an agreement in asset management. The supervisory arm of the ECB recently opposed the application of an accounting treatment known as Danish compromise in two acquisitions pursued by the euro area banks. This in question for similar transactions. “The negative opinions can serve as a slowing factor in M&A stake in the sector,” the NPA’s analyst, Suvi Platerink Kosonen, said in a note on Monday. The attitude of the ECB sets a damper to the expectation that the by -law, designed to reduce the capital burden on banks that diversify by adding insurance operations, can be used to encourage purchases of investment firms or wealth managers. BNP Paribas SA’s last year tried to apply the rule in a big case by agreeing to buy Axa SA’s asset manager through its insurance unit. But the French bank said on Monday that the ECB recently expressed opposition to the plan. The announcement comes shortly after Italian lenders Banco BPM Spa said he was notified of the central bank’s negative position on the application of the Danish compromise in the management of assets management. Banco BPM and BNP Paribas both indicated that the negative view of the ECB does not make up a final decision, with Banco BPM adding the release of March 26 that it is in ‘continued’ discussions with the ECB. The Italian bank also said that the final decision lies with another regulator, the European Banking Authority. When the capital rule was first agreed in 2012 under the EU Council presidency, the idea was to make it less troublesome for banks to diversify to insurance, which is strictly regulated. For that purpose, banks only have to partly include insurance companies in calculating their total capital requirements, making it more attractive to own it. Initially a temporary solution, the Danish compromise became permanent this year. BNP Paribas and Banco BPM recently tried to apply the rule to proposed acquisitions of asset management firms. By doing the transactions through their insurance units, they tried to reduce the impact on their regulatory capital. The Danish compromise would permanently open ‘new and wider M&A boundaries for banks’,’ Andrea Filtri, Mediobanca Spa analysts, said in a note in September, shortly after BNP Paribas revealed its plan to buy Axa investment managers. The negative view of the ECB’s negative view on the transactions seems to be a surprise to BNP Paribas and Banco BPM, with the French lenders shooter issuing a statement on Monday showing the return expectations of the Axa IM agreement in that scenario. As for Banco BPM, CEO Giuseppe Castagna said a few days before the ECB indicated its opposition to use the Danish compromise that he was sure the regulator would approve the structure. The Danish compromise is “intended to be applied to the insurance sector and not to have asset management companies, for example,” banking head Claudia Buch said in a Bloomberg News interview. BNP Paribas and Banco BPM each said they would continue to follow the transactions, even if they could not reach the favorable capital treatment. In the case of BNP Paribas, it can increase the hit to a capital metric known as the CET1 ratio with about 10 basis points to about 35 basis points, it says. More stories like these are available on Bloomberg.com © 2025 Bloomberg LP first published: 14 Apr 2025, 09:20 IST