Published by Global Banking & Finance Review®
Posted on January 12, 2026
2 min readLast updated: March 1, 2026
Add as preferred source on GoogleThe EBA confirms no capital relief for banks owning asset managers via insurers, closing potential regulatory loopholes in EU banking rules.
MILAN, Jan 12 (Reuters) - The European Banking Authority has clarified that current European Union banking rules prevent lenders that own asset management firms through an insurance unit from applying to the asset managers favourable capital treatment reserved for the bank's insurance businesses.
The measure closes a potential loophole that regulators say could enable capital arbitrage.
Under a provision in the EU's Capital Requirements Regulation (CRR) known as the "Danish Compromise", banks owning an insurer can hold capital against their insurance subsidiaries on a risk-weighted basis rather than deducting the holdings in full from their capital, reducing the burden for banks of owning an insurer.
Now permanent, the Danish Compromise was initially introduced as a temporary benefit to facilitate the introduction of international banking rules known as the "Basel framework" which the EU adopted after the global financial crisis of 2008-2009.
A lack of regulatory clarity on whether the Danish Compromise could apply to a bank buying an asset manager through its insurance arm last year resulted in Italy's Banco BPM buying asset manager Anima Holding on the expectation - mistaken as it has turned out - that it could make use of the favourable capital rules.
In a document published on its website on Friday, the EBA said it had reviewed transactions where asset managers had been acquired through insurance subsidiaries of banking groups.
The EBA noted "these cases have raised questions" about whether the asset manager should be consolidated at group level for regulatory purposes, or could benefit from the Danish Compromise like the insurance units that owned them when it came to assessing the adequacy of banks' capital buffers.
"Such treatment could lead to regulatory arbitrage, where group structures are designed to place financial institutions under insurance subsidiaries to benefit from more favourable capital treatment or avoid deductions," the EBA said.
The EBA said the rules forbade such a move because the CRR "explicitly includes subsidiaries of subsidiaries, meaning that a financial institution held through an insurance undertaking qualifies as a subsidiary of the parent institution".
(Reporting by Valentina Za; Editing by Hugh Lawson)
Capital relief refers to regulatory measures that allow banks to reduce the amount of capital they must hold against their assets, thereby freeing up capital for other uses.
The Danish Compromise is a provision in the EU's Capital Requirements Regulation that allows banks to hold capital against their insurance subsidiaries on a risk-weighted basis.
Asset management involves managing investments on behalf of clients, including institutions and individuals, to achieve specific financial goals.
Capital requirements are regulatory standards that determine the minimum amount of capital a bank must hold to ensure its stability and solvency.
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