Featured Product

    PRA Sets Out Stance on Prudential Treatment of Software Assets

    December 30, 2020

    PRA published a statement that highlights its intent to consult on the prudential treatment of software assets. PRA confirmed that it intends to maintain a position whereby all software assets continue to be fully deducted from the common equity tier 1 (CET1) capital. Following publication of EC Regulation 2020/2176 on the prudential treatment of software assets, the requirements in Article 36(1)(b) of the amended Capital Requirements Regulation (CRR2) became effective on December 23, 2020. Article 36(1)(b) of CRR2 exempts software assets from the deduction requirement for intangible assets from CET1.

    In accordance with the European Union (Withdrawal Agreement) Act 2020, this requirement now applies to the PRA-regulated firms. As noted in a PRA statement on June 30, 2020, this revised regulatory treatment of software assets does not derive from the Basel Standards and is specific to CRR. PRA has looked for evidence for realizable or recoverable value of software assets in liquidation or in stress, including drawing on information from firms, and found no credible evidence that software assets can absorb losses effectively in stress. PRA is, therefore, concerned that exempting software assets from the CET1 capital deduction requirements could undermine the safety and soundness of UK firms.

    In due course, PRA intends to consult to maintain the earlier position whereby all software assets continue to be fully deducted from CET1 capital. PRA does not normally pre-announce its intended approach for forthcoming consultation. However, in this case, PRA considered it appropriate to inform firms of its intention in advance, so they can take this into account when making capital management and other decisions that may be impacted by this change. While the revised EU requirement now applies to PRA-regulated firms, PRA recommends that firms should not base their distribution or lending decisions on any capital increase from applying this requirement. Firms should also take into account any significant software assets included in their regulatory capital in making capital management decisions.

     

    Related Link: Statement

     

    Keywords: Europe, EU, UK, Banking, Software Assets, CRR2, Regulatory Capital, Basel, EC, PRA

    Featured Experts
    Related Articles
    News

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News
    News

    FSB and NGFS Publish Initial Findings from Climate Scenario Analyses

    The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.

    November 15, 2022 WebPage Regulatory News
    News

    FSB Issues Reports on NBFI and Liquidity in Government Bonds

    The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.

    November 14, 2022 WebPage Regulatory News
    News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News
    News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News
    News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News
    News

    EU Finalizes Rules Under Crowdfunding Service Providers Regulation

    The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.

    November 08, 2022 WebPage Regulatory News
    News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News
    News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8596