French banks are making significant strides that could reshape the European asset management landscape. The acquisition of AXA Investment Managers by BNP Paribas heralds a new era under Basel III regulations, according to Mediobanca’s bank analyst Andrea Filtri. “The once-forbidden dream is now reality, opening new horizons for mergers and acquisitions,” he said.
The deal between BNP Paribas and AXA IM, involving assets under management valued at 850 billion euros, serves as a benchmark for a regulatory mechanism that MedioBanca dubs ‘the banking dream’. This mechanism permits banks to undertake substantial mergers and acquisitions with minimal impact on their capital reserves.
BNP›s strategy, Filtri said, may set a precedent for other banks across Europe. 
“The BNP-AXA transaction is not merely another acquisition; it represents a radical shift in how banks can capitalise on regulatory frameworks to their advantage. It transforms a regulatory measure into a potent strategic tool,” he explained.
Pioneering efficient deal structures
Instead of conducting the purchase through its principal banking unit, BNP Paribas orchestrated the acquisition through its insurance subsidiary, BNP Paribas Cardif, effectively mitigating capital strain.
“We regard France as the shadow intellectual owner of the Danish Compromise, the behind-the-scenes Richelieu, its fiercest promoter and its pioneer adopter.”
Andrea Filtri, bank analyst at Mediobanca
Central to this strategy is the so-called Danish Compromise, initially a temporary measure within the Basel III framework that has significantly evolved since its implementation by the European Union in April 2024. This regulation allows banks designated as financial conglomerates to differently account for the goodwill from insurance acquisitions, thereby significantly lowering the capital required.
Had BNP Paribas opted for a direct acquisition, analysts estimate that the capital depletion would have approached 0.65 percentage points, or about 5 billion euros, highlighting the considerable savings through this strategic structuring. This manoeuvre demonstrates BNP›s regulatory expertise and sets a benchmark for how major banks might pursue future acquisitions under evolving financial regulations.
Under recent updates in the Basel III regulations, particularly the Capital Requirements Regulation III (CRR3), the goodwill generated from this acquisition is treated as a non-bank equity investment with a risk weight of 250 percent, minimising the impact on BNP’s core capital reserves. This innovative structuring not only demonstrates BNP›s regulatory acumen but also establishes a template for future transactions in the banking sector.
Danish Compromise as behind-the-scenes Richelieu
“We regard France as the shadow intellectual owner of the Danish Compromise, the behind-the-scenes Richelieu, its fiercest promoter and its pioneer adopter. All French banks have long been bancassurers, exporting this business model across borders and becoming formidable competitors to insurance companies, particularly in life rather than property and casualty insurance,” Filtri said.
The strategic impact of such mergers extends to the Benelux region, where similar strategies could significantly alter the banking landscape. For example, a potential merger between ABN Amro and ASR Netherlands could utilise the Danish Compromise for capital efficiency, Filtri noted. However, the magnitude of this transaction introduces substantial political and regulatory hurdles that might impede progress.
Similarly, a merger between ING and NN Group could diversify ING›s revenue streams beyond traditional interest-based earnings. Despite the apparent financial benefits, the merger faces considerable domestic challenges, suggesting that Dutch banks might adopt these strategies more slowly than their French counterparts.
‘Revolutionary period’
“We are witnessing a revolutionary period in European banking,” Filtri said. “The full impact of these changes will unfold over the coming years, potentially setting new standards for how banks operate within regulatory frameworks.”
“Banks that are not yet bancassurers should quickly reconsider their position. We have already seen many banks announcing or buying back their insurance joint ventures. Furthermore, banks should proactively seek to expand in insurance by purchasing insurance companies and assets, and through their insurance units, acquiring asset and wealth management companies that were previously considered too costly in terms of diluting capital ratios,” Filtri advised.
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