Featured Product

    EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR

    March 01, 2021

    EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR). The proposed standards put forward comparable disclosures that address how climate change may exacerbate other risks within the balance sheets of institutions, how institutions are mitigating those risks, and the green asset ratio on exposures financing the taxonomy-aligned activities. The consultation package includes tables for qualitative disclosures on ESG risks and templates for quantitative disclosures on climate-change-related physical and transition risks. It also includes templates for quantitative information and key performance indicators (KPIs) on climate change mitigating measures, including the green asset ratio on taxonomy-aligned activities and other mitigating actions. As specified in CRR, these disclosure requirements are expected to be applicable from June 2022 on an annual basis during the first year and biannually thereinafter. The comment period for this consultation ends on June 01, 2021.

    On the quantitative side, the implementing standards propose comparable disclosures on climate-change-related transition and physical risks. In case of climate change physical risks, institutions should start working on the identification of exposures toward sectors and geographies exposed to climate change events linked to physical acute and chronic risks; a disclosure template for this information has been included for consultation. The proposed implementing standards also include quantitative disclosures on institutions’ mitigating actions supporting their counterparties in the transition to a carbon-neutral economy and in the adaptation to climate change. In addition, they include a green asset ratio, which identifies the institutions’ assets financing activities that are environmentally sustainable according to the EU taxonomy, such as those consistent with the European Green Deal and the Paris agreement goals. 

    On the qualitative side, the consultation paper includes three tables that specify the disclosure requirements for ESG risks. These disclosures are designed in line with the discussion paper that EBA has published in preparation for the report that the authority has to draft following Article 98(8) of the Capital Requirements Directive (CRD IV). The tables and instructions rely on the definitions, terminology, and structure presented in that paper. Thus, the consultation paper sets out proposals for the disclosure of qualitative information on the ESG risks that may manifest on institutions’ balance sheets from the impact of these ESG factors and risks on their counterparties through main transmission channels (including physical and transition channels). Qualitative disclosures are expected to complement the quantitative information when interpreting the information on carbon-related activities or the green asset ratio.

    When developing these proposals, EBA has built on recommendations from the FSB Task Force on Climate-related Financial Disclosures (FSB-TCFD), EC's non-binding guidelines on climate-change reporting, and on the EU taxonomy. EBA has developed this consultation paper in parallel and consistently with the Advice to EC on disclosures under Article 8 of the Taxonomy Regulation, including a common proposal for a green asset ratio. EBA has deliberately designed the green asset ratio disclosure requirements to match the data and timelines that large corporates under the Non Financial Reporting Directive (NFRD) are required to produce following Article 8 of the Taxonomy Regulation. In its factsheet on ESG disclosures, EBA acknowledged the potential difficulty in obtaining accurate data, due to which banks can use proxies, estimates, and ranges where reliable data is not yet available. EBA expects reliable data for the green asset ratio from December 2022 from counterparties subject to the NFRD disclosure obligations; however, expectation is much longer, until June 2024, for other data including those from small and medium enterprises, corporates below 500 staff members, and retail counterparties. 


    Related Links

    Comment Due Date: June 01, 2021

    Keywords: Europe, EU, Banking, Pillar 3, Disclosures, ESG, CRR, Basel, Climate Change Risk, Green Asset Ratio, Implementing Technical Standards, Investment Firms, EBA

    Featured Experts
    Related Articles

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News

    BCBS Report Examines Impact of Basel III Framework for Banks

    The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.

    February 28, 2023 WebPage Regulatory News

    PRA Consults on Prudential Rules for "Simpler-Regime" Firms

    Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.

    February 28, 2023 WebPage Regulatory News

    DNB Publishes Multiple Reporting Updates for Banks

    DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.

    February 28, 2023 WebPage Regulatory News

    NBB Sets Out Climate Risk Expectations, Issues Reporting Updates

    The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting

    February 24, 2023 WebPage Regulatory News

    EBA Updates Address Securitization Standards and DGS Guidelines

    The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.

    February 21, 2023 WebPage Regulatory News

    FSB Publishes Letter to G20, Sets Out Work Priorities for 2023

    The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023

    February 20, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8793