The EACB welcomes the opportunity to comment on the draft EBA Discussion Paper on management and supervision of ESG risks for credit institutions and investment firms.
We appreciate the comprehensive approach pursued by the EBA, with a view to have a consistent integration of ESG risks in the prudential domain building upon established concepts such as risks to capital and liquidity and the overall governance framework.
We believe that indeed ESG risks can only be integrated in the SREP by reflecting them in the existing four SREP components, or pillars, (from business model and governance to risks to capital and liquidity coming from the known categories of credit, market and operational risk).
We also call on policy makers not to shift entirely on banks the burden to stimulate an orderly transition of economic agents. While customers’ engagement is primal, and cooperative banks are by their very nature committed to accompany their members/customers on a long-term relationship, this engagement to support transition has its limits. Banks might be able to encourage customers, but not oblige them.
Moreover, we would like to highlight that cooperative banks have a longstanding orientation towards close and long-term engagement with customers. Client/members are the owners of the banks, they may sit in the management body, and cooperative banks play a fundamental role in animating and serving the economic and social life of the local communities. Moreover, they generally pursue a very conservative attitude regarding the distribution of profits and the enhancement of the capital position. These features should be adequately considered as “natural” risk mitigants in particular when supervisors come to assess the social and governance factors and risks affecting institutions.