ECB President Answers Queries on Application of EU Taxonomy
ECB published a letter in which the President Christine Lagarde answered questions, from a Member of the European Parliament, on the application of the EU taxonomy on sustainable finance. In response to the question on the use of the EU taxonomy to estimate the volume of outstanding taxonomy-aligned loans, the ECB President stated that, at present, no infrastructure for collecting and reporting this information exists. In this context, she highlighted that the overall framework of the EU taxonomy is still incomplete and, therefore, not yet ready for use by corporates and banks. The delegated acts outlining the methodologies for calculating and disclosing the alignment with the taxonomy criteria will be gradually adopted in the coming months and the framework will only enter into full force in 2023.
The second question answered by Ms. Lagarde in the letter concerns what further changes in ECB instruments, EU legislation, or national legislation would be needed to ensure usability of the taxonomy at the loan level. The ECB President highlighted that finalization of the delegated acts of EC on the taxonomy, along with the ongoing work of EBA and Platform on sustainable finance, should provide the main forum to address the most urgent challenges related to the application of the taxonomy to loans and potentially advise on possible future legislative changes. Ms. Lagarde also mentioned that she had discussed the possible use of AnaCredit to collect information on the environmental characteristics of bank loans in her letter to Ernest Urtasun, a Member of the European Parliament. However, AnaCredit constitutes only one of the tools at the disposal of ECB to collect information on the taxonomy-alignment of banks’ lending activities and—depending on the purpose of this data—might not be the most appropriate one. ECB is closely monitoring gaps in the data and possible additional data requirements, while being fully mindful of the need to ensure consistency and avoid unnecessary reporting burdens in the context of a rapidly evolving regulatory framework. While the process of mainstreaming the EU taxonomy across the financial sector is at its inception, ECB is committed to do its part in taking this process forward. As the EU taxonomy framework is implemented and the related data become available, ECB stands ready to make the relevant statistics available to the public.
Additionally, in a separate joint statement, EC and ECB highlighted that, following the conclusion of the consultation on January 12, 2021 and a period of preparatory work, ECB will consider whether to start a digital euro project toward mid-2021.
Related Links
Keywords: Europe, EU, Banking, Sustainable Finance, Taxonomy, ESG, Climate Change Risk, AnaCredit, Taxonomy Regulation, Reporting, Credit Risk, EC, ECB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Michael Denton, PhD, PE
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
Previous Article
CBIRC Evaluates Governance at Banks, Proposes Licensing MeasuresRelated Articles
APRA Publishes Results of Climate Risk Self-Assessment Survey
The Australian Prudential Regulation Authority (APRA) has published the findings of its latest climate risk self-assessment survey conducted across the banking, insurance, and superannuation industries.
ACPR Publishes Updates Related to CRD IV and Covered Bonds
The French Prudential Supervisory Authority (ACPR) published a notice related to the methods for calculating and publishing prudential ratios under the Capital Requirements Directive (CRD IV) and the minimum requirement for own funds and eligible liabilities (MREL).
EIOPA Publishes Guidance on Climate Change Scenarios in ORSA
The European Insurance and Occupational Pension Authority (EIOPA) published the risk dashboard based on Solvency II data and the final version of the application guidance on climate change materiality assessments and climate change scenarios in the Own Risk and Solvency Assessment (ORSA).
EBA and ECB Respond to Proposals on Sustainability Disclosures
The European Banking Authority (EBA) and the European Central Bank (ECB) published their responses to the consultations of the International Sustainability Standards Board (ISSB) and the European Financial Reporting Advisory Group (EFRAG) on sustainability-related disclosure standards.
BIS Report Notes Existing Gaps in Climate Risk Data at Central Banks
A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.
EBA Publishes Multiple Regulatory Updates for Regulated Entities
The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022.
EIOPA Issues SII Taxonomy and Guide on Sustainability Preferences
The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.8.0 of the Solvency II data point model (DPM) and XBRL taxonomy.
EESC Opines on Proposals on CRR and European Single Access Point
The European Union published, in the Official Journal of the European Union, an opinion from the European Economic and Social Committee (EESC); the opinion is on the proposal for a regulation to amend the Capital Requirements Regulation (CRR).
HM Treasury Publishes Multiple Regulatory Updates in July 2022
HM Treasury published a draft statutory instrument titled “The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2022,” along with the related explanatory memorandum and impact assessment.
APRA Consults on Prudential Standard for Operational Risk
The Australian Prudential Regulation Authority (APRA) is seeking comments, until October 21, 2022, on the introduction of CPS 230, which is the new cross-industry prudential standard on operational risk management.
