EBA targets banks’ digitalization boost by issuing a consultation on RTS regarding software assets

The European Banking Authority (EBA) launched a consultation on draft Regulatory Technical Standards (RTS) specifying the prudential treatment of software assets. As the banking sector is moving towards a more digital environment, the aim of these draft RTS is to achieve an appropriate balance between the need to maintain a certain margin of conservatism in the prudential treatment of software assets and their relevance from a business and an economic perspective. The consultation runs until 09 July 2020.

In developing the Regulatory Technical Standards (RTS), EBA has considered a few important factors that are critical in creating a uniform approach:

• The differences in the valuation and amortization of software assets and in the value realized from their sale;
• The international developments and the differences in the regulatory treatment of investments in software;
• The different prudential rules that apply to insurance undertakings; and
• The diversity of the financial sector in the Union, including non-regulated entities such as financial technology companies.

This article provides further insight on the the prudential treatment based on the amortization pattern of the software assets.