UniCredit gets ECB approval to use lighter capital rules on insurance holdings

UniCredit Gets ECB Green Light for Danish Compromise in Capital Calculation

ECB Approval and Impact on UniCredit's Capital Reserves

MILAN, Sept 8 (Reuters) - UniCredit has received European Central Bank authorisation to apply more favourable banking rules known as the 'Danish Compromise' to calculate the impact of its insurance holdings on its capital reserves, the Italian lender said.

Understanding the Danish Compromise

The Danish Compromise provision allows banks to risk-weight their insurance investments rather than deduct them in full from capital. Originally introduced by the European Union as a temporary arrangement when Denmark held the rotating EU presidency, the measure was later made permanent.

Implementation and Expected Benefits

UniCredit said in a statement on Tuesday it would start applying the new method from the third quarter and expected it to add half a percentage point to its core capital ratio.

Strategic Moves in Insurance Business

Under a push to boost the bank's fee income, UniCredit Chief Executive Andrea Orcel last year completed the internalisation of the domestic life insurance business after buying out partners CNP Assurances and Allianz.

Partnership with Allianz and Future Opportunities

UniCredit and Allianz also have a partnership on non-life insurance in Italy under an accord that is due for renewal by the end of next year, giving the Milanese bank the chance to bring that venture in house as well.

Based on the terms of the partnership, either party must disclose by the end of the first half a decision to end the joint venture.

Scope and Limitations of the Danish Compromise

The Danish Compromise treatment applies to insurance subsidiaries that banks control and consolidate in full into their own accounts.

That excludes from the benefit a roughly 9% stake in Italian insurer Assicurazioni Generali bought by UniCredit as a financial investment.

(Reporting by Valentina Za. Editing by Giulia Segreti and Mark Potter)