The European Banking Federation has called on EU policymakers to rethink their prudential requirements for software investments by banks, describing the current treatment as a "significant disincentive for investments in innovation".
At present, the software of EU banks is treated as an intangible asset and as such must be deducted from capital ratios when calculating capital requirements.
Responding to an EU consultation on financial technology, the EBF says that the rules must be changed if Europe is to remain competitive globally.
"Software is a strategic asset for European banks, enabling them to serve clients where and when needed, to develop cyber security measures, and to deliver digital services competitively," the EBF argues. "The current prudential treatment is a significant disincentive for investments in innovation. It also distorts the global playing field, particularly when compared to the US, where software investments can be treated as tangible assets that do not have to be deducted from a bank’s capital ratio."
The Federation, which represents more than 4500 banks across the EU, applauded the European Commission's creation of a fintech task force to address policy issues relating from the rise of digital innovation.
Says Wim Mijs, chief executive officer of the EBF: “There is no denying that financial technology is the DNA of our industry. Banks actively embrace fintech to serve clients with new products and services, and it’s great to see how fresh competition helps us keep our focus. If we as Europeans really want to play a role in fintech globally we need to create room for innovative financial services in a flourishing Digital Single Market.”
Despite the warm words, the EBF cautioned against the provision of special treatment to new tech-driven entrants in the market, calling for a balanced approach to regulatory issues.
"Such an approach can be described as ‘Same services. Same risks. Same rules. Same supervision." the Federation says. "This would ensure high standards for consumer protection, market integrity and financial stability in a level playing field that supports fair competition and innovation."
The document notes that the industry is committed to fintech partnerships and in many cases is already actively working with newcomers.
"The creation of a sound European fintech ecosystem requires collaboration between established banking businesses, neo-digital challengers and other types of companies," states the paper. "Potential regulatory obstacles to such partnerships should be prevented and if necessary eliminated."