In today’s digital era, the current approach of the EU-Legislator to the capital treatment of software assets is
a disadvantage in comparison with non-EU banks and FinTech Companies and must be tackled in order to
achieve a level playing field, preserve fair competition and advance technological innovations and digitalisation
in the financial (banking) sector. Furthermore, banks can be encouraged to foster investment in digital
solutions and/or IT systems only if software is not treated differently than other (e.g. tangible) assets and can
Additionally, we advocate that the exemption rule for avoiding capital deduction should be optional (opt-out)
for certain institutions. For institutions that have hardly any software assets capitalised, the cost of implementing
the prudential amortisation approach would be disproportionate to the capital savings. The institutions in
question should therefore have the option of continuing to deduct the software assets in full from CET 1.
The EBA provides some relief when it comes to the capital treatment of software, but it is still far too restrictive
and inefficient in comparison to the US/Swiss Model. The prudential treatment of software assets in Europe
should not penalize innovation. At the same time, banks need flexibility in cases where the benefits do not
compensate the cost, Therefore, an option to not apply the RTS would be welcomed by certain institutions.
This may lead to situations where implementation of the new approach will not be completely supported and
continuation of complete deduction of the software from CET 1 would be preferred instead. If the RTS is too
burdensome a possibility to opt out and not apply, it may become important for some financial institutions.
Another possibly not very well accepted point is the proposed time period for the prudential amortization
which is deemed extremely short.
Article 36 (1) (b) CRR 2 states that the decisive criterion for the exception is that the value of software assets
is not negatively affected by resolution, insolvency or liquidation. This provision could be interpreted that
the exception applies to software assets, where the value does not materially suffer in a crisis. In addition,
the Art. 36 (4) CRR 2 mandates EBA to define a threshold below which the software is affected to an extent
that it cannot be deducted from the CET 1 Capital. Banks should focus on the turning point from which the
software assets would be negatively affected by the resolution, insolvency or liquidation to a degree that the
exemption in Art. 36 (1) (b) CRR2 would not be applicable.
We do not see a simplification but rather a complication having another amortization for prudential purposes.
In our view, a pragmatic approach is, as stated above, to trust in the work of external auditors and apply the
accounting amortization rules for prudential purposes as well.
If regulators want to include a certain margin of conservatism or prudence in the valuation of software assets,
an easy to implement haircut on top of the accounting amortization would be the most efficient way for
Therefore, it needs to be ensured that EBA develops clear criteria to specify the materiality of
negative effects on the values, which do not cause prudential concerns and provides a
comprehensive guidance on how to perform this assessment in a way that is not unnecessarily
burdensome and complex.
Furthermore, we would prefer the RTS to enter into force already on the day following its
publication in the OJ (instead of twenty days thereafter; see Article 2 of the Draft RTS on p.
28). This would ensure that banks can apply these provisions as early as possible (as intended
by the CRR Quick Fix). Alternatively, we propose a (possibly also retroactive) application of the
provisions as of 30 September 2020 and therefore we request such a provision to be added to
Finally, in light of the short consultation period as well as the CRR Quick Fix, we would like
to express the need to prioritize the work on this RTS and faster finalization of the RTS.
Otherwise the process would counter the efforts of EU legislators and wouldn’t allow for a fast
relief for banks.
As part of the Risk Reduction Measures (RRM) package adopted by the European legislators, the Capital
Requirements Regulation (CRR) has been amended and introduced, among other things, an exemption from
the deduction of intangible assets from Common Equity Tier 1 (CET1) items for prudently valued software
assets, the value of which is not negatively affected by resolution, insolvency or liquidation of the institution.
In addition, the EBA was mandated to develop draft RTS to specify how this provision shall be applied.
These EBA draft RTS specify the methodology to be adopted by institutions for the purpose of the prudential
treatment of software assets. In particular, these draft RTS introduce a prudential treatment based on their
amortisation, which is deemed to strike an appropriate balance between the need to maintain a certain margin
of conservatism in the treatment of software assets as intangibles, and their relevance from a business and
an economic perspective.