Banks in bid to win software investment boost from EU
European Union banks facing increasing competition from financial technology firms could find it easier to invest in software under rule changes being discussed with regulators.
EU banking rules treat software as a cost rather than an investment, forcing lenders to cover expenditure on digital applications with an equal amount of capital.
But with banks threatened by a growing number of cyberattacks and under pressure from nimble new entrants to the sector, regulators are now considering changes.
"The Commission services are in a dialogue with stakeholders to gain a better understanding of the interaction between accounting and prudential treatment of software," a European Commission spokeswoman told Reuters.
The Commission, which proposes laws at the EU level, shied away from the issue in an overhaul of banking rules last year, despite lobbying from banks in the region.
If expenditure on software, which amounts to roughly half of banks' total digital investment, were treated in the EU as it is in the US it could free up more than €20bn in capital this year alone, one banking lobbyist said.
"It would help immensely if the Commission recognised the importance of this issue," Wim Mijs, head of the European Banking Federation, said.
Although fintech is still relatively small, the BIS warned of the "increasing challenge" it poses to banks, which have in many cases reacted by buying startups and their technologies.
Banks argue software is a key component of their business, as customers demand more digital products such as mobile payments or online services. (Reuters)