Banco BPM sees 51 bps capital benefit from 'Danish compromise'

(Reuters) - Italy's third-largest bank Banco BPM said on Wednesday it would apply for a favourable regulatory treatment of its insurance holdings and expected in this way to add half a percentage point to its best-quality capital ratio.

Banco BPM said it had been recognised as a financial conglomerate by the European Central Bank (ECB), a prerequisite that will allow it to access a more favourable way of calculating consolidated capital ratios.

Under European Union banking rules known as 'Danish compromise', because they were approved in 2012 when Denmark held the EU presidency, banks are allowed to risk weigh their insurance investments instead of deducting them from capital.

Banco BPM owns insurance businesses Banco BPM Vita and Banco BPM Assicurazioni.

The ECB granted Banco BPM the status of financial conglomerate after the Italian bank gained full control of its Banco BPM Vita and Banco BPM Assicurazioni insurance joint-ventures in July 2022, by buying out French partner Covea.

Since then Banco BPM has sold a 65% stake in its non-life business Banco BPM Assicurazioni to Credit Agricole, while retaining full control of the life insurance operations.

(Reporting by Alberto Chiumento; editing by Valentina Za)