European banks invested over €18bn in software in 2016, despite the current regulatory capital framework for banks in the EU treating software as a cost rather than an investment, according to a report published by European Banking Federation (EBF).
The survey report is based on a sample of 108 banks of different sizes with different business models in 12 European nations.
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According to the EFB, recent projections placed the IT investments by European banks well above €50bn per year, with a significant chunk invested in software.
Prevailing regulations require European banks to match their software investments with an almost equal amount of capital to maintain their capital ratios.
EBF pointed out that this rules makes software investments by a European bank more expensive, distorting the level playing field in global banking.
“Because of the existing rules, roughly every euro that an EU bank invests in IT, be it for innovation or cybersecurity, needs to be backed with one euro of the most expensive category of funding. This is not only a significant disincentive for investments but also leads to unfair competition between major players as well as jurisdictions,” EBF noted.
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By GlobalDataThe EBF urged EU policy makers to exclude software investments from the general regime applicable to intangible assets under the definition of regulatory capital.
“The current revision of the Capital Requirements Regulation presents an opportunity for Europe to establish a fair competition and compete for the global leadership in the digital innovation in this area,” the statement added.
