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

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.

    January 31, 2023 WebPage Regulatory News
    News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.

    January 17, 2023 WebPage Regulatory News
    News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News
    News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News
    News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News
    News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News
    News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News
    News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.

    December 22, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8699