ECB Nears Decision on Extending Danish Compromise to Asset Manager Acquisitions

A view of the European Central Bank (ECB) headquarters in Frankfurt, Germany

Frankfurt – March 21, 2025The European Central Bank (ECB) is expected to reach a decision by next week on whether the “Danish Compromise” — a favourable capital treatment originally intended for banks' insurance holdings — can be extended to acquisitions of asset managers made through their insurance subsidiaries, according to a source familiar with the matter.

This review comes in response to formal requests from institutions such as BNP Paribas and Banco BPM, which are seeking to apply the Danish Compromise in recent and upcoming transactions involving asset managers. BNP Paribas is pursuing the acquisition of AXA Investment Managers, while Banco BPM is bidding for Italy’s Anima Holding. Both deals hinge on receiving regulatory confirmation that their insurance arms can apply the same capital relief to these investments.

The Danish Compromise, first introduced in 2012 under Denmark’s EU presidency, allows banks to treat insurance holdings on a risk-weighted basis instead of fully deducting them from core capital, reducing the capital burden on banking groups that also own insurers. Given the heavily regulated nature of the insurance sector, the compromise was deemed an efficient and balanced approach.

A broader interpretation of the rule would significantly reduce the capital impact of asset manager acquisitions through insurance units — a development that could accelerate consolidation in Europe’s financial services sector.

While the European Parliament made the Danish Compromise a permanent fixture of EU regulation last year, the ECB retains discretion on how the rule is applied. Claudia Buch, head of ECB Banking Supervision, and Frank Elderson, Vice Chair of the ECB’s Supervisory Board, have both emphasized that each application is assessed individually and case-by-case.

Speaking this week at Morgan Stanley’s European Financials Conference, Elderson acknowledged the growing interest in the Danish Compromise and the need for regulatory clarity.

“We are very much aware that the market — and many of you — would like to see clarity sooner rather than later,” he said.“These decisions are highly specific and we cannot comment on individual transactions, but we recognize the urgency."

The ECB is expected to communicate its rulings directly to the banks involved, followed by the publication of formal guidelines for broader market application. Should the regulator endorse this expanded interpretation, the move could catalyze a new wave of M&A activity across Europe’s banking and asset management sectors.