Santander challenges the ECB's decision regarding its capital adequacy ratio
Santander Fires Back at ECB over Capital Ratio and Brazilian Subsidiary's Deferred Tax Assets
Santander has thrown down the gauntlet in a bold move, filing an appeal with the European Court of Justice against the European Central Bank (ECB). The bank is taking issue with a decision made by the ECB on October 16, 2024, concerning the correct treatment of deferred tax assets (DTA) originating from Santander Brazil and its impact on the entire group.
According to the appeal published in the Official Journal of the European Union, the bank alleges that the ECB has breached European prudential requirements by requiring it to deduct the Brazilian subsidiary's tax assets from its Common Equity Tier 1 (CET1) ratio.
In particular, Santander argues that the ECB should not have required both pre- and post-November 23, 2016 deductions, and that DTAs from the Brazilian subsidiary should not be subject to a risk weighting of 250%. The bank maintains that these DTAs do not rely on future income and are either directly replaceable in case of liquidation or insolvency or become a credit on the central government of the state in which the subsidiary is based—in this case, Brazil.
Regarding DTAs from Brazil after November 23, 2016, Santander highlights that a 2019 amendment to the European prudential requirements regulation had no impact on DTAs originating from third countries like Brazil.
To make things clear, let's break it down:
- Santander is questioning the ECB's decision to deduct its Brazilian subsidiary's tax assets from its CET1 ratio.
- The bank claims that the ECB has breached European prudential requirements in the process.
- Santander argues that certain deferred tax assets should not be subject to a risk weighting of 250% or be deducted at all.
- The bank maintains that these assets are replaceable or become a credit on the Brazilian government in the event of liquidation or insolvency.
While the legal wrangling continues, it's worth remembering that matters like these usually follow a process: ECB decision → administrative review. If unsuccessful, there's an appeal to the EU General Court, with a final appeal to the ECJ on points of law only. For the latest updates on Santander's appeal, keep tabs on ECB press releases or the ECJ's case registers.
Related Topics
- Santander
- European Court of Justice
- European Central Bank
- Expansión
- Brazil
- European Union
- Capital Ratio
- Deferred Tax Assets
- European Regulation
- CET1
- EUROPAPRESS
Enrichment Insights
- As of recent developments, there's no specific mention of Santander appealing to the ECJ regarding capital ratio or DTAs related to its Brazilian subsidiary in public litigation stages.
- Santander's recent legal activity involves successfully narrowing a former employee's whistleblowing claims in a UK tribunal and other ECJ cases addressing issues like EU citizenship rights and media freedom.
- The European Central Bank (ECB) is currently under scrutiny by Santander, as the bank has filed an appeal with the European Court of Justice (ECJ) disputing the ECB's decision to deduct deferred tax assets (DTAs) from its Common Equity Tier 1 (CET1) ratio.
- According to the appeal, Santander believes the ECB has breached European prudential requirements by requiring the deduction of DTAs originating from its Brazilian subsidiary, citing that these assets are either directly replaceable or become a credit on the Brazilian government in the event of liquidation or insolvency.
- To support its case, Santander argues that certain DTAs should not be subject to a risk weighting of 250% or be deducted at all, contending that these DTAs do not rely on future income.
- The legal process for Santander's appeal will progress through ECB press releases, administrative review, an appeal to the EU General Court, and a final appeal to the ECJ on points of law only, if necessary.
