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ECB’s supervisory hand opposed the application of an accounting treatment known as a Danish agreement in two acquisitions followed by the euro sector banks. This has put its use in suspicion for similar transactions.
“Negative opinion M&A can act as a slow factor in the sector,” an analyst Suvi Platerink Kosonen of Ing Groep NV said in a note on Monday.
The ECB’s stance hurts hopes that the regulation designed to reduce the burden of capital on banks by adding insurance operations can be used to purchase, investment firms or money managers. The final year of the BNP Paribas SA tried to implement the rule in a large deal, by agreeing to buy the asset manager of AXA SA through its insurance unit.
But the French bank said on Monday that the ECB recently opposed the plan. Shortly after the Italian lender Banko BPM Spa, it was announced that this asset management deals were informed about the negative attitude of the central bank to make a Danish agreement.
Both Banco BPM and BNP Pariba indicated that the negative attitude of the ECB does not form a final decision, the bank BPM has added in its release on 26 March that it is in “running” with ECB. Italian bank also said that the final decision is with another regulator, European Banking Authority.
When the Capital Rule was first agreed in 2012 under the Danish Presidency of the Council of European Union, the idea was to make the insurance diversity to diversify insurance for banks, which is tightly regulated. By that end, banks only have to partially involve insurance businesses when calculating their total capital requirements, making it financially more attractive.
Initially a temporary fix, Danish agreement became permanent this year.
BNP Paribas and Banco BPM have recently sought to implement the rule in proposed acquisitions of asset management firms. By conducting deals through his insurance units, he demanded to reduce the impact on his regulatory capital.
Permanent Danish Agreement will open “new and comprehensive M&A Frontiers for Banks”, Mediobanka Spa analysts Andrea Filtry said in a note in September, BNP Pariba unveiled its plan to buy AXA investment managers.
ECB’s negative attitude on transactions has come as a surprise for BNP Pariba and Banko BPM, the French lender issued a statement on Monday that in that scenario, the AcSa IM deal withdrew its return expectations from the IM deal.
For Banco BPM, CEO Guseppe Castagana said that a few days ago the ECB indicated its opposition to use the Danish Agreement that it was certain that it was certain that the regulatory structure would approve.
The Danish Agreement “intends to apply to the insurance sector and not, for example, Asset Management Undertaking,” ECB Banking Supervisory Head Claudia said in a Bloomberg News interview last week.
BNP Paribas and Banco BPM have said that they will continue to pursue deals, even if they cannot get favorable capital treatment. In the case of BNP paribas, it can increase HIT up to a capital metric known as CET1 ratio, which is about 10 basis points up to about 35 basis points, it said.
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