EBF PRESS RELEASE
Banks invested over €18 bln in software as of 2016
- New EBF survey clarifies software investments by European banks
- EBF reiterates need to adjust prudential treatment of software
BRUSSELS, 31 October 2017 – Survey results released today by the European Banking Federation shows that European banks as of end 2016 had invested more than €18 billion in software, despite being forced to accept prudential rules that require software investments to be treated as costs instead of an investment.
The survey, conducted to bring clarity on the size of these investments, shows that European banks had invested more than 18.2 billion euro in software as of 2016. The EBF survey was conducted voluntarily and is based on a sample of 108 banks of different sizes with different business models in 12 European countries.
Software has become a core asset in bank business models and banks are recognized as significant investors in software and information technology. Some projections in recent years placed the total IT investments by European banks well above €50 billion per year, a significant part of which was invested in software.
The current regulatory capital framework for credit institutions in the EU treats software as a cost rather than an investment, stifling innovation in financial services. Prudential rules do not recognize the value for capital purposes, despite evidence indicating that software has value even in the case of liquidation of a bank.
European banks instead are required to match their software investments with an almost equal amount of capital to maintain their capital ratios. This requirement makes software investments by a European bank more expensive when compared to other competitors such as Fintech and US banks, distorting the level playing field in global banking.
Because of the existing rules, roughly every euro that an EU bank invests in IT, be it for innovation or cybersecurity, needs to be backed with one euro of the most expensive category of funding. This is not only a significant disincentive for investments but also leads to unfair competition between major players as well as jurisdictions.
As representative of the European banking industry, the EBF has invited EU policy makers in Brussels to consider the need for a level playing field when it comes to the prudential treatment of software investments. Software investments should be excluded from the general regime applicable to intangible assets under the definition of regulatory capital. The current revision of the Capital Requirements Regulation presents an opportunity for Europe to establish a fair competition and compete for the global leadership in the digital innovation in this area.
Media contact:
Raymond Frenken, Head of Communications, +32 2 508 3732, r.frenken@ebf.eu
About the EBF:
The European Banking Federation is the voice of the European banking sector, uniting 32 national banking associations in Europe that together represent some 3,500 banks – large and small, wholesale and retail, local and international – employing approximately two million people. EBF members represent banks that make available loans to the European economy in excess of €20 trillion and that securely handle more than 400 million payment transactions per day. Launched in 1960, the EBF is committed to creating a single market for financial services in the European Union and to supporting policies that foster economic growth.
Subscribe to the EBF Weekly + FinReg Agenda
Every Friday at noon you can receive the EBF Weekly + Financial Regulation Agenda. This agenda presents an overview of upcoming European and international meetings and conferences in financial regulation, as well as important general financial and economic events and key EBF meetings for the week ahead. CLICK HERE TO SUBSCRIBE
Subscribe to the EBF Morning Brief
The EBF Morning Brief is published Monday through Friday morning and brings you the top banking headlines, relevant announcements from the EU institutions and the latest from the EBF and its members, national banking associations in 32 countries in Europe. CLICK HERE TO SUBSCRIBE
The post EBF survey: banks invested €18 bln in software as of 2016 appeared first on EBF.
]]>PRESS RELEASE
x
A step in the right direction: prudential rules for EU banks’ software assets are adjusted
BRUSSELS, 22 December 2020 – The Official Journal of the European Union has today published the Delegated Regulation (EU) 2020/2176 on the prudential treatment of software assets for EU banks. As a result, EU banks will no longer have to fully deduct prudently valued software and IT systems from Common Equity Tier 1 items. The new rules will enter into force on 23 December 2020.
Lawmakers and the European Banking Authority (EBA) have partially tackled the mismatch between prudential rules and the digitalisation of the EU banking sector. The EBA has delivered a prudent, pragmatic, and effective proposal in October this year. The suggested rules partially remove the longstanding penalisation to European banks’ investments into software, relieving part of the regulatory cost. We much welcome that the European Commission and legislators have validated EBA’s approach and allow the new rules to take effect without delay.
“We at EBF have highlighted for a long time that capital rules should not punish investments in IT and software. Continuous and state-of-the-art digitalisation is key for our sector’s efficiency, competitiveness, and profitability, but also for its digital operational resilience as well. For much too long EU banks investing in software have had to do so at much higher cost than their non-EU peers and competitors. This is a step in the right direction,” says Wim Mijs, Chief Executive Officer of the European Banking Federation.
x
MEDIA CONTACTS:
Ruta Barthet, Senior Communications & Media Officer
r.barthet@ebf.eu, +32 492 46 73 04
Raymond Frenken, Director of Communications
r.frenken@ebf.eu +32 2 508 3732
x
ABOUT THE EUROPEAN BANKING FEDERATION:
The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.
Subscribe to the EBF Weekly + FinReg Agenda
Every Friday at noon you can receive the EBF Weekly + Financial Regulation Agenda. This agenda presents an overview of upcoming European and international meetings and conferences in financial regulation, as well as important general financial and economic events and key EBF meetings for the week ahead. CLICK HERE TO SUBSCRIBE
Subscribe to the EBF Morning Brief
The EBF Morning Brief is published Monday through Friday morning and brings you the top banking headlines, relevant announcements from the EU institutions and the latest from the EBF and its members, national banking associations in 32 countries in Europe. CLICK HERE TO SUBSCRIBE
The post A step in the right direction: prudential rules for EU banks’ software assets are adjusted appeared first on EBF.
]]>EBF advisor: Blazej Blasikiewicz
iii
Publication date: 24 September 2018
iii
Key points:
Outsourcing arrangements are widely used by the banking industry as they contribute to the efficiency and to the competitiveness of banks’ business models. Outsourcing indeed helps banks focus on their core business and gives them access to skills and services that are not available in house at the same level of efficiency and/or effectiveness.
Against this background, it is crucial that the Guidelines (GLs) strike the right balance between necessary safeguards preserving the integrity of outsourcing institutions, and the required flexibility to adapt to a fast-moving economic and technological environment. In particular, we assume that the specific requirements (should) only apply to outsourcings classified as critical/important.
The EBF’s key points relate to the following issues:
Scope of outsourcing: The draft EBA GLs provide for outsourcing requirements that are in line with MiFID II. MiFID II only provides for requirements for the ‘performance of operational functions which are critical for the provision of continuous and satisfactory services.
Definition and examples of what is or is not outsourcing: The current definition is extremely broad and risks encapsulating all activities performed by third parties for regulated institutions as outsourcing.
Intragroup outsourcing: Intragroup outsourcing should be subject to lower obligations than extra-group third-party outsourcing agreements.
Standard contractual clauses will be necessary for outsourcing agreements: Financial institutions may find difficulty in negotiating and getting some of the terms required by these GLs to be accepted by some large suppliers, such as, inter alia, the exercise of unrestricted access rights, or ex ante notification requirements in the sub-outsourcing of critical functions.
Sub-outsourcing assessment: Institutions may find it difficult to perform the risk assessment of sub-outsourcing activities.
Notification requirements: Given that the EBA has reiterated publicly that no upfront approval of outsourcing activities is necessary, in our view it would be sufficient for any bank to have a repository available which could be delivered upon request to the NCAs.
Summary table of requirements: Across the GLs it is not clear which requirements apply to general outsourcing, which to outsourcing of a critical or important function and which to intragroup arrangements respectively.
Cloud: The consideration of cloud services as outsourcing and, in case it is considered as such, as general outsourcing or outsourcing of critical functions should follow the same principles than the rest of services and technologies. It should depend on the nature of the activities outsourced.
Subscribe to the EBF Weekly + FinReg Agenda
Every Friday at noon you can receive the EBF Weekly + Financial Regulation Agenda. This agenda presents an overview of upcoming European and international meetings and conferences in financial regulation, as well as important general financial and economic events and key EBF meetings for the week ahead. CLICK HERE TO SUBSCRIBE
Subscribe to the EBF Morning Brief
The EBF Morning Brief is published Monday through Friday morning and brings you the top banking headlines, relevant announcements from the EU institutions and the latest from the EBF and its members, national banking associations in 32 countries in Europe. CLICK HERE TO SUBSCRIBE
The post EBF comments on the draft EBA Guidelines on outsourcing appeared first on EBF.
]]>There is a specific issue in the way bank assets in Europe are valuated. An issue that is blocking the further digital transformation and growth of banks.
Current prudential rules prescribe that the use of banking software is penalised instead of incentivised. Software is still valuated as an intangible asset, making it less worthy than basic office furniture.
In other words, EU banking rules treat software as a cost rather than an investment. Unlike in the US, European banks are forced to cover expenditure on software solutions with the same amount of capital.
Investing in software solutions, updates and development is crucial to remain competitive and to strengthen cybersecurity.
A recent survey conducted by EBF shows that European banks as of 2016 had invested more than €18 billion in software, despite the costly conditions in place.
Without a doubt, financial technology and software solutions have become critical functions of the work in banking.
Even in case of a liquidation, when bank assets are sold, software can still be used and thus proves its value.
If we want to let banks innovate, and therewith the European economy, treating software as an ordinary asset is a pure necessity.
Former MEP Cora van Nieuwenhuizen at the 2017 European Banking Summit:
Remarks by Gonzalo Gasos at the QED Banking Package Review event:
Subscribe to the EBF Weekly + FinReg Agenda
Every Friday at noon you can receive the EBF Weekly + Financial Regulation Agenda. This agenda presents an overview of upcoming European and international meetings and conferences in financial regulation, as well as important general financial and economic events and key EBF meetings for the week ahead. CLICK HERE TO SUBSCRIBE
Subscribe to the EBF Morning Brief
The EBF Morning Brief is published Monday through Friday morning and brings you the top banking headlines, relevant announcements from the EU institutions and the latest from the EBF and its members, national banking associations in 32 countries in Europe. CLICK HERE TO SUBSCRIBE
The post Prudential treatment of software: the use of software by banks should be encouraged not punished appeared first on EBF.
]]>EBF PRESS RELEASE
EBF praises EU determination to clear digital hurdles
- Data and cybersecurity are key priorities for banking sector
- Prudential rules for software in banking need to be addressed
- EBF ExCo Digital Strategy Group meets in Tallinn, Estonia
TALLINN, Estonia, 14 September – Noting fresh European Union initiatives in digital policy, including cybersecurity and the free flow of data, the European Banking Federation wishes to underline its support for this EU course while asking policymakers to also recognize specific issues that block innovation in banking.
EBF CEO Wim Mijs
Speaking in the wake of a Tallinn meeting of the EBF ExCo Digital Strategy Group, which shapes the federation’s work on the digital transformation of the banking sector, Wim Mijs, Chief Executive Officer of the EBF, said he is greatly encouraged to see the EU recognize the need to put digital on top of its policy agenda.
“This focus is important not only for the competitiveness of our economy and for a proper functioning of the digital single market but also for our banking sector, with financial technology and security in its DNA. Data and cybersecurity are key priorities for the banking sector,” said Mr Mijs.
Among the specific issues that the EU also needs to consider is the prudential treatment of software under the current rules for the banking sector. Unlike their U.S. counterparts, European banks are currently forced to treat software investments as a cost instead of an investment. This makes bank expenditure on digital applications more expensive in Europe. EBF also hopes to establish clarity on exemptions for digital experts under EU remuneration rules.
“When it comes to innovation in financial services we favour a level playing field, both inside the single market and globally. We need to adjust the current framework to support innovation in financial services in Europe. It would benefit the entire Fintech ecosystem in Europe if the Commission recognized this.”
The EBF welcomes the European Commission’s ambition to better protect EU citizens when it comes to cybersecurity. The Commission has released a proposal on regulating the free flow of data in the EU and presented a plan to update the EU’s industrial policy. It announced an EU initiative on Financial Technology, or Fintech, for 2018.
“To reap the full benefits of the digital transformation and of the digital single market many obstacles still need to be cleared. Banks need to be able to transfer data across borders efficiently so they can effectively respond to the needs of customers,” said Mr Mijs.
Meanwhile the EU Presidency, currently held by Estonia, placed Fintech on the agenda of Friday’s meeting of EU finance ministers, acknowledging that Fintech is “accelerating change” in the financial sector. Estonia this week also hosts the EU cybersecurity conference, set to discuss safeguarding the digital single market.
“Let me praise Estonia for its digital leadership,” said Mr Mijs. “With less than two years to go in the current EU policy term the clock is ticking. There is no time to waste if we want a competitive digital economy in Europe, with new services in a truly digital single market that can improve the lives of EU citizens.”
For more about the EBF’s digital strategy click here.
Media contact:
Raymond Frenken, Head of Communications, +32 2 508 3732, r.frenken@ebf.eu
About the EBF:
The European Banking Federation is the voice of the European banking sector, uniting 32 national banking associations in Europe that together represent some 3,500 banks – large and small, wholesale and retail, local and international – employing about two million people. EBF members represent banks that make available loans to the European economy in excess of €20 trillion and that securely handle more than 400 million payment transactions per day. Launched in 1960, the EBF is committed to creating a single market for financial services in the European Union and to supporting policies that foster economic growth.
Subscribe to the EBF Weekly + FinReg Agenda
Every Friday at noon you can receive the EBF Weekly + Financial Regulation Agenda. This agenda presents an overview of upcoming European and international meetings and conferences in financial regulation, as well as important general financial and economic events and key EBF meetings for the week ahead. CLICK HERE TO SUBSCRIBE
Subscribe to the EBF Morning Brief
The EBF Morning Brief is published Monday through Friday morning and brings you the top banking headlines, relevant announcements from the EU institutions and the latest from the EBF and its members, national banking associations in 32 countries in Europe. CLICK HERE TO SUBSCRIBE
The post EBF praises EU determination to clear digital hurdles appeared first on EBF.
]]>EBF PRESS RELEASE
EBF notes fresh US guidance on ‘accidental Americans’
- US Treasury clarifies requirements for U.S. Tax Identification Numbers
- Foreign banks will not be systematically in significant non-compliance
BRUSSELS, 5 October – The European Banking Federation notes the updated guidance published recently by the United States Treasury clarifying how foreign banks need to act when they are unable to collect and report US Tax Identification Numbers (TIN) for existing customers with US indications.
The updated guidance is good news for people known as ‘accidental Americans,’ who are unable to comply fully with the Foreign Account Tax Compliance Act (FATCA) because they cannot provide their European banks with a US tax number. This is particularly problematic for people who for example left the US decades ago and never returned, or for people who were only born in the US and there stayed only for a very brief period.
Many of these customers do not have a TIN and often encounter difficulties and long delays before obtaining one. The problematic nature of the “accidental American” situation was already previously acknowledged by the Treasury and Internal Revenue Service.
Many European banks, defined as ‘Foreign Financial Institutions’ in the US, were concerned that by offering services to ‘accidental Americans’ they might be considered as being in significant non-compliance with the due diligence requirements of FATCA and related Intergovernmental Agreements (IGA). Banks feared they might be penalized with the application of a 30% FATCA withholding tax on all US payments made to them.
US Treasure Notice 2017-47[1] now has clarified that Foreign Financial Institutions in Model 1 IGA jurisdictions will not be systematically in significant non-compliance with an applicable IGA during 2017, 2018, and 2019 solely as a result of a failure to report U.S. TINs. In order to be relieved from the non-compliance status, the Foreign Financial Institution will have to report the account holder’s date of birth, make annual requests for the TIN, and search its electronic records for missing U.S. TINs before reporting information on 2017.
[1] Revised Guidance Related to Obtaining and Reporting Taxpayer Identification Numbers and Dates of Birth by Financial Institutions https://www.irs.gov/pub/irs-drop/n-17-46.pdf
For more information:
Roger Kaiser, Senior Advisor Tax, +32 2 508 3721, r.kaiser@ebf.eu
Media contact:
Raymond Frenken, Head of Communications, +32 2 508 3732, r.frenken@ebf.eu
About the EBF:
The European Banking Federation is the voice of the European banking sector, uniting 32 national banking associations in Europe that together represent some 3,500 banks – large and small, wholesale and retail, local and international – employing about two million people. EBF members represent banks that make available loans to the European economy in excess of €20 trillion and that securely handle more than 400 million payment transactions per day. Launched in 1960, the EBF is committed to creating a single market for financial services in the European Union and to supporting policies that foster economic growth.
Subscribe to the EBF Weekly + FinReg Agenda
Every Friday at noon you can receive the EBF Weekly + Financial Regulation Agenda. This agenda presents an overview of upcoming European and international meetings and conferences in financial regulation, as well as important general financial and economic events and key EBF meetings for the week ahead. CLICK HERE TO SUBSCRIBE
Subscribe to the EBF Morning Brief
The EBF Morning Brief is published Monday through Friday morning and brings you the top banking headlines, relevant announcements from the EU institutions and the latest from the EBF and its members, national banking associations in 32 countries in Europe. CLICK HERE TO SUBSCRIBE
The post EBF notes fresh US guidance on ‘accidental Americans’ appeared first on EBF.
]]>EBF advisor: Noemi Papp
Publication date: 19 August 2017
In the official response the following was highlighted:
- EBF supports the additional guidance to the existing CEBS Guidelines.
- However, the draft recommendations remain too high-level and could leave room to multiple interpretations at national level.
- We are additionally concerned that the draft EBA recommendations, as they currently stand, may not be sufficient to have a positive impact on cloud adoption within financial services in Europe.
- EBA’s objective should be to reach a point where notification on a case-by-case basis is not required at either EU or national level.
- It is important to continuously assess and update the EU outsourcing regulation to ensure it is adapted to the technology-enabled world.
- Cloud Service Providers should be certified based on recognised international standards.
- The development of high-level principles by the industry should be favoured.
- Further consideration should be given to the GDPR to be implemented by May 2018.
- The EBA recommendations should explicitly mention the underlying risk driver.
Subscribe to the EBF Weekly + FinReg Agenda
Every Friday at noon you can receive the EBF Weekly + Financial Regulation Agenda. This agenda presents an overview of upcoming European and international meetings and conferences in financial regulation, as well as important general financial and economic events and key EBF meetings for the week ahead. CLICK HERE TO SUBSCRIBE
Subscribe to the EBF Morning Brief
The EBF Morning Brief is published Monday through Friday morning and brings you the top banking headlines, relevant announcements from the EU institutions and the latest from the EBF and its members, national banking associations in 32 countries in Europe. CLICK HERE TO SUBSCRIBE
The post EBF response to EBA draft recommendations on outsourcing to cloud service providers appeared first on EBF.
]]>