EBA issues final report on draft RTS regarding prudential treatment of software assets

In alignment with the amendment of the CRR focusing on the exemption from deduction of intangible assets from CET1 items for ‘prudently valued software assets the value of which is not negatively affected by resolution, insolvency or liquidation of the institution’, the European Banking Authority (EBA) has just published the RTS describing the treatment and application of these deductions.

The revised prudential treatment came as a result of an increasing importance of software investments in a more digitally oriented global banking sector that is believed to have a competitive disadvantage vis-à-vis to certain non-regulated technological players such as FinTech companies and other competitors that are not required to deduct such assets from CET1 capital.

This article provides further insight  on the prudential amortization approach.