The EACB welcomes the opportunity to comment on the draft EBA ITS on prudential disclosures on ESG risks in accordance with Article 449a CRR.
At an overarching level, we understand that CRR 2 indicates that the application of the disclosure is to be done at the highest level of consolidation. We would appreciate if this could be further expressed also in the ITS to dispel any uncertainty, including in the background and rationale section. The impact of subsidiaries’ activities would indeed be captured since banks will have to consolidate the information.
The granularity of the ITS departs from the usual level of granularity of Pillar 3 and seems more in line with that of supervisory reporting sets. Taking into account that this information is for investors, we doubt that this degree of granularity is useful for markets appreciation. It is true that, as EBA recalled during the public hearing, certain disclosure requirements are also rather granular, particularly in the case of NPLs, but those elements build on well-established financial information and can potentially inform more directly on the profit & loss impact.
Particularly in consideration of the granularity of the information requested, a more adequate timeline for implementation should be considered as a lot of effort has to be produced to amend banking systems in order to fulfill the expected requirements.
Moreover, since the taxonomy is not a risk metric, the inclusion of the Green Asset Ratio (GAR) in Pillar 3 disclosures appears questionable; the taxonomy should not per se become a component of the prudential framework. In addition, in light of the ongoing work of the European Commission on the disclosure of the GAR under Art. 8 of the Taxonomy Regulation, if the GAR were nevertheless to become part also of the Pillar 3 disclosures, we strongly recommend establishing only one single set of disclosure for this metric under both legal acts (ITS and Delegated Act) and avoid any duplication or even slightly different sets which would only increase the burden on institutions and complicate readability for investors.
We see the planned extension of the Green Asset Ratio (GAR) to all SME loans as particularly problematic. Many SMEs will not be able to provide the relevant data in the coming years. Against this background, minimum thresholds for taxonomy checks should be provided both for individual transactions and also at portfolio levels, especially with a view to cater for small and medium-sized enterprises. Moreover, with regard to the GAR, we would also welcome a clarification indicating that where data cannot be obtained with reasonable efforts, but a TAC (Taxonomy Alignment Coefficient) has been introduced according to the plans of the EU Commission (e.g. Application of JRC-estimated coefficients by NACE code, ESMA Advice on Article 8 of the Taxonomy Regulation), the relevant TAC can be used.
Furthermore, we consider inappropriate that the whole responsibility for collecting data, developing heatmaps and assessing regions and sectors which are prone to chronic climate change events is imposed on the banking sector. We reiterate our demand that fundamental information and heatmaps should be provided by governments and/or other official bodies. This could help ensure an equal data basis and understanding for the risk factors and channels for all banks, improving the comparability of the data disclosed. Physical risks could be mapped with NACE-Codes published centrally by a public entity so that banks could use that information, or at least fall back on it, when no specific information from the counterparty is available. In general, companies from all business sectors at a specific location are subject to the same physical risks, and common information would benefit both credit institutions – whose burden would be reduced – and risk identification in general, as public entities may have better access to data and more data quality.
Finally, we would strongly suggest including a list of abbreviations and acronyms in order to facilitate a common and quick understanding of the ITS.