Latest news with #ClaudiaBuch
Bloomberg
3 days ago
- Business
- Bloomberg
ECB Pushes Banks to Fix Shortcomings in Private Market Exposures
The European Central Bank's top bank supervisor said the watchdog is pushing lenders to address shortcomings in how they manage risks from their dealings with direct lenders and buyout firms. The comments in a blog post by Supervisory Board Chair Claudia Buch confirm a Bloomberg report on Friday, which said the ECB is escalating its scrutiny of lenders' exposures to private funds amid concerns that the fast ascent of related asset classes raises substantial new risks.
Reuters
17-04-2025
- Business
- Reuters
Regulatory snag in BNP's AXA IM bid may cast doubt on similar deals, sources say
PARIS/LONDON, April 17 (Reuters) - BNP Paribas ( opens new tab embarked on a 5.1 billion euro ($5.8 billion) purchase of an asset management business last year expecting regulators would let it through with minimal impact on the bank's capital, people familiar with the matter said, a model some peers were keen to replicate. But the latest assessment from its chief supervisor, the European Central Bank, tempered those expectations, leading to a greater hit to its capital than the lender had initially priced in, the people said. BNP said on Monday it had lowered its expected returns on the deal following guidance from the ECB on the so-called Danish Compromise - a prudential treatment that allows lower capital requirements for banks that own insurance units. It added that the prudential treatment of the deal will be disclosed at closing, pending final talks with regulators. BNP and the ECB declined to comment. Dealmakers had anticipated a wave of tie-ups after the BNP-AXA deal as European money managers sought to fend off U.S. rivals and demand grows for cheap technology-driven investing. Some analysts had foreseen other banks would follow the French lender's footsteps as a way to boost fees. "It will maybe dampen excitement a little bit," said Johann Scholtz, an analyst at Morningstar. "What makes it a little bit surprising is, in the current environment, you'd expect the ECB to be maybe a little bit more supportive of consolidation across the board." RAISING THE BAR In an interview published on Friday on the ECB's website, Claudia Buch, the central bank's chief supervisor, said the central bank interprets the 'Danish Compromise' as applying to the insurance sector — not to asset management firms. The ECB's decision took some dealmakers by surprise and the lack of clarity around the regulatory treatment may make such transactions more difficult to execute, several said. Some said parties pursuing deals may now seek written assurances from the ECB, effectively raising the bar for such transactions. Not all experts shared that view. "I do not believe that this will materially impact similar activity in the EU," said Alvin Abraham, chief executive of prudential risk consultancy firm Katalysys. The ECB's decision on the use of the Danish Compromise, by limiting the impact on its capital reserves, signals that many of the benefits of the EU provision still apply, Abraham added. Matthew Clark, an analyst at Mediobanca, agreed that BNP's statement on Monday indicated a partial application of the favourable capital treatment. "That very strongly points to the idea that there's been some kind of splitting mechanism used whereby the ECB said: 'you're buying an asset manager where a lot of the business is insurance related, so let's split that kind of notionally in two," Clark said, meaning that the Danish Compromise was applied to the insurance part AXA IM's activities only. The Danish Compromise is a provision that makes it less costly for banks to hold stakes in insurance companies. Instead of subtracting the full value of those holdings from their capital, banks can apply a risk-based calculation. By lowering the capital impact of insurance stakes, the measure encourages banks to own insurers and can reduce the cost of certain acquisitions made through insurance arms. BNP is acquiring AXA IM through its insurance business Cardif. However, following the ECB's comments on the "prudential" treatment of the acquisition of asset management companies, the French lender cut returns guidance to 14% in the third year, from a previously projected 18%, followed by more than 20% in the fourth year, it said in its statement on Monday. BNP's market update follows a similar ECB assessment last month, when the regulator issued a negative opinion on Italian bank Banco BPM's request for favourable capital treatment for its proposed bid for fund manager Anima. BNP Paribas shares have gained about 15% since the AXA IM deal was announced in early August, trailing French rivals Crédit Agricole and Societe Generale, as well as the European banking index (.SX7E), opens new tab, which is up by close to 28% over the same period. ($1 = 0.8814 euros)
Reuters
10-04-2025
- Business
- Reuters
ECB warns that fragmented EU bank scene is vulnerable to shocks
WARSAW, April 10 (Reuters) - Europe must remove barriers to bank mergers as a fragmented financial landscape with differing national rules and customs leaves the bloc vulnerable to shocks and instability, European Central Bank supervisor Claudia Buch said on Thursday. Europe's largest banks are far smaller than their U.S. counterparts and the ECB regularly argues for more mergers but politicians often resist cross border takeover attempts, fearing the loss of national champions to a foreign rival. Highlighting this trend, Germany has for months opposed UniCredit's approach to Commerzbank ( opens new tab, despite the ECB's green light for the Italian lender to raise its stake. "This fragmentation not only restricts efficiency gains but also leaves financial systems more vulnerable to asymmetric shocks and instability," Buch told a university lecture in Warsaw. Although Europe has done much to harmonise rules to facilitate cross border mergers, too many differences remain on the national level to impede the creation of cross-border entities, Buch argued. "There are still many differences in areas such as insolvency law, the mortgage market and corporate governance structures, all of which affect the valuation of assets and the ability to collect collateral," Buch argued. The EU also has work left to do. The bloc still lacks a common deposit insurance scheme and countries EU rules give plenty of leeway to member states in how they apply some rules on provisioning, Buch said. "Mergers create larger banks with the aim of reaping the benefits from economies of scale and scope," Buch said.
Reuters
27-03-2025
- Business
- Reuters
Euro zone banks must prepare to cope with geopolitical shocks, ECB warns
FRANKFURT, March 27 (Reuters) - Euro zone banks are resilient but need to be prepared to handle geopolitical shocks and macro-financial threats, European Central Bank supervisory chief Claudia Buch said on Thursday. Policy reversals in some key areas by U.S. President Donald Trump 's administration has been unnerving financial markets in recent months, and policymakers are now assessing how this could affect growth, stability and financial risk. Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S. newsletter. Sign up here. This comes on top of financial and political stress created by Russia's war in Ukraine and the Western sanctions that followed. "A potential deterioration in asset quality and possible economic disruptions caused by geopolitical conflicts or the effects of financial sanctions require heightened attention, sufficient capital and robust governance and risk management systems in banks," Buch said in a report. Banks need to be prepared for cybersecurity threats and also need to address identified weaknesses in resilience and risk management, Buch said in the ECB's annual report on supervisory activities. Buch also called on lawmakers to make progress in approving a crisis management and deposit insurance framework to better deal with bank failures and protect depositors.
Reuters
21-03-2025
- Business
- Reuters
ECB to decide by next week on wider use of favourable capital rule, source says
FRANKFURT, March 21 (Reuters) - The European Central Bank will decide at the latest by next week whether favourable capital rules on banks' insurance holdings, known as the 'Danish Compromise', also apply when the insurance units buy an asset manager, a person close to the matter said. The decision, which follows requests from France's BNP Paribas ( opens new tab and Italy's Banco BPM ( opens new tab to use the Danish Compromise in purchases of asset managers carried out through their insurance businesses, potentially has far-reaching implications for consolidation across Europe's financial sector. Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S. newsletter. Sign up here. The Danish Compromise reduces the burden for banks of owning an insurer by letting them hold capital against insurance holdings on a risk-weighted basis rather than deducting them in full from their capital. The idea is that, given the insurance sector's tight regulation, a full capital deduction is not necessary. Under a broad interpretation of the rules, the Danish Compromise could also sharply reduce the capital impact for a bank of buying an asset manager through its insurance arm. BNP Paribas' acquisition of AXA Investment Managers and Banco BPM's bid for Italian asset manager Anima Holding ( opens new tab are both relying on the ECB continuing to grant Danish Compromise status to the expanded insurance businesses. The ECB's decision is communicated to the banks in question, which can then inform markets. The ECB is also planning to publish guidelines after the individual decisions. The European Parliament a year ago approved regulation that made permanent the Danish Compromise, which was a temporary arrangement agreed in 2012 when Denmark held the European Union's rotating presidency. A regulatory clarification has indicated that the favourable treatment could apply not only to insurance businesses held by banks, but also to assets those banks buy through their insurance units. A broad interpretation of the rule could stoke further deals in Europe's financial sector, bankers have said. However, the ECB's chief supervisor, Claudia Buch, has said each application is assessed individually. This week, Frank Elderson, vice chair of the ECB's supervisory board, reiterated requests by banks to apply the Danish Compromise were processed "strictly on a case-by-case basis" and that there was no set timeline for a decision. However, he said supervisors were aware of the need for clarity. "The ECB, and I myself am acutely that questions about the Danish Compromise are very much top of the minds of many people in this room and probably many people outside of this room," he told Morgan Stanley's European Financials Conference. "I cannot speak to any specific transactions or banks," he said, adding "we are very much aware that the market and many of you would like to see clarity sooner rather than later."
