EU: New EC rules could enable banks to increase their software spending

With FinTechs eroding away traditional banks’ lead, rules governing investments in software in the European Union (EU) may loosen.

According to a news report in Reuters, as the EU banking rules stand today, money spent on software is treated as a cost instead of an investment, which forces lenders to have an equal amount of expenditures on digital apps and the same amount of capital. Due to competition from FinTechs and an increase in the threat of cyberattacks, banking regulators in the EU are mulling making some changes to that.

“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. “We will envisage appropriate action if needed.”

Banks in the EU had been calling for changes in banking regulation since 2016, something the European Commission stayed away from last year. According to the report, money spent on software makes up about half of banks’ overall digital investments, and if it wasn’t, there would be more than US$24 billion capital that is freed.

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