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EBA changes software capital rules for banks

EBA changes software capital rules for banks

The European Banking Authority has set out plans to let banks include software assets in their capital requirement calculations, helping lenders to boost their safety buffers.

Currently, banks are required to deduct the value of software from their capital buffers upfront. But, banks argue that this discourages them from spending money in important areas such as digitisation and cybersecurity.

The EBA has now agreed, saying that with the sector increasingly digitised, it wants to change the rules to "strike an appropriate balance between the need to maintain sufficient conservatism in the prudential treatment of software assets and their relevance from a business and an economic perspective".

In its draft Regulatory Technical Standards (RTS), the EBA says banks will be able to amortise the value of their software assets over a period of three years. The move would boost capital across a sample of 64 banks by EUR20 billion in 2021.

The draft standards have now been set to the European Commission, which is expected to greenlight them later in the year.

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