The Danish Compromise is a rule that offers an alternative to the double counting of capital in well-regulated bancassurance groups.
The prudential regime applicable to credit entities and certain investment firms is established in Regulation (EU) No 575/2013, which sets out the capital requirements, limits on large exposures and prudential consolidation rules, with the aim of ensuring the financial soundness of entities and the stability of the system. In general, Regulation (EU) No 575/2013 establishes the obligation to deduct significant holdings in financial entities that are not prudentially consolidated from the highest quality own funds (CET1), where such holdings may result in the double counting of capital or an overestimation of a group’s actual loss-absorbing capacity.
You can read the full Legal Briefing here.