The road is long, but something is starting to move on Danish compromiseThe European Parliament has in fact given the green light to the annual report on Competition Policy 2025. The document, reports Mf, also includes an amendment which underlines the importance of ensuring a equal competitive conditions between banks and insurance companies in the treatment of cross-shareholdings. And even if the Danish compromise is not directly cited, the reference to the capital discount guaranteed to banks, but not to insurance companies, it is clear.
The text is not binding, but asks Brussels to evaluate the issue as part of the review of Ficod and Solvency II.
What is the Danish Compromise?
The Danish Compromise is a provision of the Capital Requirements Regulation (CRR), approved by the EU in 2012. It is called this for a very simple reason: at the time, Denmark held the presidency of the Union.
The regulation provides that banks which own direct shares in insurance companies can enjoy certain benefits accounting facilities, one in particular: the reduction of the absorption of regulatory capital, avoiding the double counting.
Usually, when a bank invests in other activities it must allocate a part of its capital to cover any risks. Using the “Danish Compromise”, banks receive favorable treatment of insurance participations in capital requirements.
The Danish Compromise does not apply to insurance (for now)
While, as mentioned, banks holding insurance stakes can enjoy the benefits of the Danish compromise, on the contrary, insurance who have banking interests they cannot take advantage of the same benefits in terms of lower capital absorption. In other words, it's much easier for a bank to buy into an insurance company's capital than for an insurance company to do the opposite.
“In our sector he says there are still inconsistency of game rules to be rebalanced and the list includes the so-called Danish compromise”, that is “the absence, for insurance companies, of regulatory advantages of prudential capital in the case of extraordinary operations that involve the acquisition of capital shares in banks, something which vice versa, and – let it be clear – the banking sector rightfully enjoys”, explained last week the President of Ania, Giovanni Liverani, according to which.
And it is precisely on the "disparity" mentioned by the association's leader that the 2025 annual report on Competition Policy calls for the EU Commission to intervene.
The potential effects on the Italian gambling game: Unipol is an interested observer.
From Italy, the ongoing debate between Strasbourg and Brussels is being observed very carefully, especially for its consequences on banking riskOn the one hand there is Intesa's 30,6 billion euro takeover bid, supported by Unipol, on Mps-Mediobanca, on the other hand there are the marriage between equals proposed by Bpm bank in Siena. In the background remains that 13% of the Generali in the belly of Piazzetta Cuccia (and therefore of MPS).
Any changes in continental regulation could indeed have profound effects on the ongoing consolidation process. Both on the alleged plans of CEOs Luigi Lovaglio and Philippe Donnet to find an alternative to Intesa's offer, and on Unipol which already has 20% of Bper in its belly and which could rise up to 40% if the takeover bid goes through.
Analysts WebSim consider the topic "particularly relevant for Unipol because it touches exactly the main regulatory limitation of the structure that will prospectively be formed following the acquisition by Unipol of the BMPS curve-out: the excessive “weight” in terms of solvency resulting from holding a banking stake within an insurance group”.
There's still a long way to go, as the report isn't binding. But if the discussions initiated at European level materialize in a more symmetrical treatment of the Danish Compromise, it could be a turning point for Europe's insurance companies. Unipol, in particular, "could accelerate the definition of a conglomerate integrated financial system while maintaining an insurer-led structure, without necessarily having to resort to a bank-led inversion/reverse merger holding company. This would be important because it would reduce or avoid the main critical point of a potential alternative scenario, namely the dilution of the cooperatives in the new banking TopCo in the event of a holding inversion/reverse merger”, conclude the WebSim experts.
