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
    News

    EC Rule on Contractual Recognition of Write Down and Conversion Powers

    The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.

    September 17, 2021 WebPage Regulatory News
    News

    ECB to Consider Climate Risks When Reviewing Collateral Framework

    In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.

    September 17, 2021 WebPage Regulatory News
    News

    SRB Provides Update on Approach to Prior Permissions Regime

    The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.

    September 16, 2021 WebPage Regulatory News
    News

    APRA Issues Further Guidance on Application of Securitization Standard

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.

    September 16, 2021 WebPage Regulatory News
    News

    ACPR Publishes Corrective Version of RUBA Taxonomy

    The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.

    September 15, 2021 WebPage Regulatory News
    News

    Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics

    The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.

    September 15, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Finalizes Guidance to Assess Breaches of Large Exposure Limits

    The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.

    September 15, 2021 WebPage Regulatory News
    News

    PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2

    The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Revises Guidelines on Stress Tests of Deposit Guarantee Schemes

    The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).

    September 15, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7483