PRESS RELEASE
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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.
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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
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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.
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]]>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.
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