Deduction of software assets from Common Equity Tier 1 capital (hereinafter CET1) for investment firms of Class 2 and Class 3

Is it appropriate to apply Article 13a of Commission Delegated Regulation (EU) No 241/2014, amended by Commission Delegated Regulation (EU) 2020/2176, regarding the deduction of software assets from CET1 to investment firms of Class 2 and Class 3, taking into account that the mentioned investment firms are not subject to the application of provisions established in Art. 113(5) and Art. 156 of the CRR, i.e. to apply 100% of risk weight to the portion of the carrying amount of software that is not deducted from CET1?

As it is stipulated in Article 9 of Regulation 2019/2033 (hereinafter IFR), the investment firms of Class 2 and Class 3 shall calculate own funds in accordance with CRR, subject to the derogations from the CRR own funds' calculation procedure set out in Article 9 of IFR. The Regulation (EU) No 241/2014 supplements the CRR and therefore is also applicable to the investment firms of Class 2 and Class 3. To further support the transition to a more digital banking sector, Article 36(1)(b) of CRR was amended by Regulation (EU) 2019/876, providing for the possibility not to reduce CET1 for prudentially valued software assets, the value of which is not negatively affected by resolution, insolvency or liquidation of the institution. Accordingly, the Regulation (EU) No 241/2014 was amended by Regulation (EU) 2020/2176 providing standardized procedures for deducting software assets from CET1. Taking into account that the IFR does not determine any derogations from the CRR regarding the deduction of software assets from CET1, it should be concluded that the investment firms of Class 2 and Class 3 could apply the standardized procedures for deducting software assets from CET1 set by Regulation (EU) 2020/2176. According to provisions established in Art. 113(5) and Art. 156 of the CRR, institutions, subject to the CRR, should apply 100% of risk weight to the portion of the carrying amount of software that is not deducted from CET1. However, the requirement to apply 100% of risk weight to the portion of the carrying amount of software that is not deducted from CET1 is not binding for investment firms of Class 2 and Class 3, as the IFR sets different approach from the CRR regarding the calculation of own funds capital requirements. Therefore, there is a different approach between the investment firms of Class 2 and Class 3 and credit institutions regarding the application of risk weight to the portion of the carrying amount of software that is not deducted from CET1.