Deduction of software assets from CET1

6.1 The PRA proposed to require full deduction from CET1 capital of all intangible assets, with no exception for software assets. This would enhance firms' safety and soundness and enable the PRA to supervise the quality of firms' CET1 capital effectively.

6.2 The PRA received eight responses to this proposal. One respondent was supportive of the proposal. Two other respondents agreed that there is currently a lack of evidence for the realisable value of software, stating that software is usually bespoke to an individual firm and therefore would have minimum realisable value on its own. Seven respondents commented on the implications of the PRA's policy on its secondary competition objective and the have regards relating to international level playing field, competitiveness and UK standing, technology innovation, and finance to real economy.

6.3 One respondent stated that the PRA's proposal would not significantly enhance firms' safety and soundness. The respondent did not explain their reasons for that view. Another respondent recognised the importance of the PRA's proposal in meeting the PRA's safety and soundness objective, but raised concerns that it could disadvantage banks and their customers, in particular small and medium-sized enterprises (SMEs). One respondent stated that software assets are important for firms' operational resilience.