Italy's major bank UniCredit announced on the 8th that it has received permission from the European Central Bank (ECB) to apply a favorable banking regulation known as the 'Danish compromise' when calculating the impact of its stake in an insurance subsidiary on its capital. Under the Danish compromise, instead of fully deducting investments in insurance businesses held by banks from their capital, a risk weight can be applied. This measure was introduced as a temporary measure when Denmark held the presidency of the European Union (EU) and was later made permanent. UniCredit stated in a statement that it will apply the new calculation method from the third quarter and expects its core capital ratio to rise by 0.5 percentage points. Last year, the bank bought out the stakes in its joint venture from CNP Assurances and Allianz, completing the in-house provision of its domestic life insurance business. The Danish compromise applies to insurance subsidiaries that are controlled by the bank and fully consolidated in its financial statements, so it does not apply to UniCredit's approximately 9% stake in Italy's insurance giant Generali, which it holds as a financial investment.
UniCredit SpAECB permission to apply the Danish compromise lets UniCredit risk-weight its insurance stake, lifting its core capital ratio by 0.5pp from Q3.
Allianz SE VNA O.N.
Assicurazioni Generali S.p.A.
Allianz SE