EU Adopts New Regulations on Bancassurance

The European Parliament, the legislature of the European Union, has adopted the recommendations of the European Commission, the EU’s executive arm, to tighten up regulations controlling Europe’s huge bancassurance industry.

Unlike the U.S., most of Europe’s giant financial groups, AXA, ING, Allianz, Aegon, Fortis, etc., offer integrated products that frequently combine insurance and banking. Their many subsidiaries engage in activities that have remained in a gray regulatory area, as it’s been difficult to categorize them as either banks or insurers.

The new legislation proposes the establishment of a single regulatory body, which will uniformly administer and enforce regulations throughout the EU over their activities. The plan is expected to greatly streamline Europe’s financial markets and increase their overall efficiency.

It will also end some dubious practices. As reported by Dow Jones Newswires, the new rules will prohibit companies from “using the same capital twice to hedge risks in separate units.” It will also stop the practice of using group debt to provide equity capital for individual operating units.