What is the EBA's clarification on the Danish Compromise?

The EBA clarified that the 'Danish Compromise' capital treatment does not apply to asset managers acquired through a bank's insurance unit.

Why did Banco BPM expect favorable capital treatment?

Banco BPM mistakenly expected favorable capital rules for its acquisition of Anima Holding via an insurance subsidiary due to regulatory ambiguity.

How does the EBA prevent capital arbitrage in banking?

The EBA closed a loophole by clarifying that asset managers owned through insurance units cannot receive preferential capital treatment, preventing regulatory arbitrage.

Home / Business and Economy / EBA Clarifies Capital Treatment for Bank Asset Managers

EBA Clarifies Capital Treatment for Bank Asset Managers

12 Jan

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Summary

EU banking rules now prevent capital benefits for asset managers via insurers.
The EBA clarified the 'Danish Compromise' applicability to asset managers.
A loophole allowing capital arbitrage has been officially closed.

EBA Clarifies Capital Treatment for Bank Asset Managers

The European Banking Authority (EBA) has issued a clarification regarding EU banking rules, specifically addressing the capital treatment of asset management firms acquired through insurance subsidiaries of banking groups. The EBA has stated that these arrangements are not eligible for the favorable capital treatment previously reserved for the insurance businesses themselves. This clarification effectively closes a potential loophole that regulators feared could lead to capital arbitrage.