NN CEO: Banks Have Unfair Advantage Over Insurers in M&A Race

In a recent interview at the World Economic Forum meeting in Davos, NN Group NV Chief Executive Officer, David Knibbe, expressed his concerns about a regulatory rule known as the Danish Compromise. This rule has played a significant role in driving recent acquisitions of asset management firms by banks. Knibbe criticized the Danish Compromise, stating that it unfairly benefits banks over insurance companies in the asset management M&A arena. He has voiced his grievances to various European regulators regarding this issue.

The Danish Compromise loophole allows banks to lessen the impact on their regulatory capital requirements when acquiring an asset management firm through an insurance subsidiary. This loophole was effectively utilized by BNP Paribas during its acquisition of AXA’s investment unit and Banco BPM SpA in Italy is set to take advantage of it in their proposed acquisition of Anima Holding SpA. Knibbe’s comments shed light on the discontent among insurance companies who perceive the competitive landscape as skewed in favor of banks.

Carlo Cimbri, chairman of Italian insurer Unipol Assicurazioni SpA, has also criticized the Danish Compromise, labeling the advantage it affords to banks in asset management M&A as “scandalous.” Knibbe highlighted the inequality by noting that insurance companies are not as favored in owning a bank, while banks find it relatively attractive from a capital perspective. This disparity has led to concerns within the insurance industry, with companies feeling that they are at a disadvantage compared to banks in similar transactions.

In 2021, NN Group agreed to sell its investment arm to Goldman Sachs Group Inc. for approximately €1.7 billion ($1.8 billion). This move indicates a strategic shift for NN Group, potentially driven by the challenges posed by the regulatory environment and the perceived advantages that banks enjoy in the asset management sector. The discontent expressed by Knibbe and other insurance executives underscores the need for a more level playing field in M&A activities involving asset management firms.

The ongoing debate surrounding the Danish Compromise highlights the complexities and nuances of financial regulations that can impact the competitive dynamics between banks and insurance companies. It also underscores the importance of regulatory frameworks that promote fair competition and prevent any one sector from gaining unfair advantages over others. As discussions continue, it will be crucial for regulators to address these concerns and ensure a balanced and equitable environment for all market participants involved in asset management M&A transactions.