By Huw Jones
LONDON (Reuters) – The safety buffers of banks in the European Union would swell by billions of euros under proposed rules that allow lenders to include the value of software investments like cybersecurity in capital calculations.
Currently a bank must deduct the value of software from its capital buffer upfront, adding 36 basis points to its core ratio or mandatory measure of stability.
The European Banking Authority (EBA) said banks will be allowed to “amortise” or taper the value of software for capital purposes over three years.
That would boost capital by about 20.2 billion euros in 2020 across a sample of 64 banks, and by 20 billion euros in 2021, it said.
“The proposed approach is designed to be simple to implement and applicable to all institutions in a standardised manner, as is the case today with the deduction treatment,” the EBA said in a statement