With the rapporteur for the European Parliament, Peter Simon (S&D, Germany) putting the finishing touches to his report on the legislative package to reduce banks' risks, which is expected in the course of September, the banking industry is campaigning for changes to the prudential requirements on banks' investments in software, a source close to the dossier told EUROPE on Wednesday 30 August.
Readers may recall that this package, which was presented by the European Commission on 23 November 2016 (see EUROPE 11674), is regarded as the most ambitious of the institution's current mandate in the banking sector. Although some progress was made under the Maltese Presidency, with political agreements reached at the Council on 16 June on the proposed directive on the hierarchy of bank creditors and on the proposed regulation on the application of international financial standard IFRS 9 (see EUROPE 11810), for the other parts of the package, the Estonian Presidency has set itself the target of securing a general approach of the Council (see EUROPE 11828).
Calling for banks' investments in software no longer to be deducted from their capital requirements, the banking industry is reported to have succeeded in getting its point across and the same source explained that certain MEPs are pushing in that direction.
In Europe, software in which a bank invests is treated as an intangible asset. This means that under the Capital Requirements Regulation (CRR), banks must deduct their software investments from their principal capital ratio when calculating their capital funds requirements.
The banking industry's argument is that the current prudential treatment considerably discourages investments in innovation and puts the EU at a disadvantage, particularly compared to the United States, where investments in software may be treated as tangible assets that do not have to be deducted from a bank's capital ratio.
Software, which constitutes a strategic asset for European banks, allows them to provide competitive digital services and to develop cyber-security measures. According to a Celent study, banks will spend more than €60 million on software in 2017. (Original version in French by Marion Fontana)