Santander challenges the ECB's decision concerning its capital adequacy ratio
📰 Breaking: Santander Takes ECB to Court Over Capital Ratio and Brazilian Subsidiary's Deferred Tax Assets
Hear ye, hear ye! Santander has thrown down the gauntlet, filing an appeal with the European Court of Justice (ECJ) against the European Central Bank's (ECB) decision on the treatment of deferred tax assets (DTA) from its Brazilian subsidiary. As per the appeal details published today, the bank alleges that the ECB has infringed upon European prudential requirements.
According to the vitriolic filing, Santander claims the ECB demanded the bank to deduct the DTA from its CET1 ratio, both before and after November 23, 2016, and apply a risk weighting of 250% to the deductible amounts. The bank argues that these DTA assets don't depend on future income and, in case of liquidation or insolvency, are automatically replaced by a tax credit in Brazil, directly becoming a credit on the Brazilian government.
When it comes to DTAs from Brazil after November 23, 2016, Santander points out that a 2019 amendment to the European prudential requirements didn't affect the DTAs originating from third countries, as the Brazilian subsidiary falls under this category.
This unmitigated attack on the ECB's decision comes as the bank's Brazilian subsidiary potentially faces a significant impact on its reported capital ratio due to the ECB's requirement to deduct DTA. Such a requirement could force the bank to raise additional capital or reduce risk-weighted assets.
In essence, Santander's argument rests on the idea that the ECB's decision is overly conservative, inconsistent with applicable EU banking regulations, and ignores relevant economic or accounting factors, thereby hampering Santander's regulatory capital. If successful, the appeal could lead to a higher amount of DTAs from Brazil being included in Santander's CET1 capital, improving the bank's capital ratios and potentially reducing capital-raising costs.
Stay tuned for further updates on this explosive situation unfolding at the European Court of Justice. This developments marks another chapter in the already tumultuous world of international banking and its intricate, ever-evolving regulation.
Related topics:- Santander- European Court of Justice- European Central Bank- Expansión- Brazil- European Union- Capital Ratio- Deferred Tax Assets- European Regulation- CET1- EUROPAPRESS
- The banking and insurance sector may experience a significant shift in regulatory capital requirements if Santander's appeal against the European Central Bank over deferred tax assets (DTA) is successful.
- The finance industry could witness a potential change in treatment for foreign subsidiary DTAs, following Santander's court case challenging the European Central Bank's (ECB) decision regarding the Brazilian subsidiary's DTAs.
