The EACB commented on the EBA draft Guidelines on ESG Scenario Analysis, emphasising the necessity to provide more detailed guidance for a simpler and leaner approach to the analysis for smaller institutions to avoid a disproportionate burden for them.
We welcome that the EBA draft Guidelines clarify that the degree of sophistication and quantification, as well as the frequency and scope of ESG scenario analysis should be commensurate to the size, nature and complexity of the institution’s activities and to ESG materiality assessment as well as should be proportionate to the institution's capabilities, needs or expected benefits. However, the application of the proposed Guidelines would result in a significant increase in the administrative burden for SNCIs, even though, in the initial phase, banks are only required to consider environmental risks and may focus on qualitative aspects and less demanding analyses. SNCIs face major challenges, including limited internal resources, a lack of specialized expertise among staff, insufficient data availability and quality, and technological constraints.
Moreover, pragmatic standard methods and sectoral benchmarks might be envisaged by the regulators in order to reduce the implementation burden, particularly for SNCIs. Supervisory authorities might also consider providing standardized sectoral and regional data analyses to help banks better understand trends and integrate such data into their risk analysis processes more efficiently. In parallel, national ESG risk databases should be developed/improved to facilitate access to relevant information.