Response to discussion on Technical Advice on selected KPIs under the Taxonomy Disclosures Delegated Act under Article 8 of the Taxonomy Regulation

Q1. Please identify your organisation (if applicable) and indicate the capacity in which you are responding to this consultation:

Other (please specify)

In your response, where applicable, please assess whether voluntary disclosure of this KPI would be meaningful and feasible, and hence should be considered.

a. We believe the most viable option is to remove the Fees and Commissions KPI (F&C KPI) from Taxonomy disclosure requirements (option a). We agree with the EBA that this KPI has limited relevance in the context of sustainability disclosures. The F&C KPI would depend on market conditions and interest/funding rates in a given year. A fees-based KPI might also have the unintended consequence of incentivizing higher fees for taxonomy-aligned activities.

Given its limitations, we do not consider that qualitative disclosure requirements on the fees and commissions would add value for investors. For audit and assurance purposes, any qualitative disclosure is likely to need to be supported by quantitative evidence and therefore would still involve operational challenges and costs for banks.

b. As stated before, the best option is to delete this KPI. Narrowing down its scope will result in additional challenges, already underlined by EBA, they include: 

• Confidentiality: the disclosures may reveal the fees and commissions charged by a credit institution for a single service provided to a client;
• FINREP: as EBA is considering deleting the datapoint related to the four activities in the FINREP template, they will not be available any longer. 

A voluntary disclosure will not resolve the issues presented above.

Q4. Should additional items from FINREP Template 22.1 also be included in the revised KPI? Please consider in particular that (i) have been assessed as unrelated to capital market activities, e.g. ‘custody and other related services’, and (ii) those that have not been mapped to the Fees and Commissions KPI, such as ‘structured finance’, ‘loans granted’, ‘commodities’.

Additional items in the KPI would not be relevant based on Taxonomy objectives (competitiveness and simplification).  Any additional item would be an additional burden. 

In terms of coherence, if EBA has assessed that the information should be deleted in FINREP, there is no reason to include it in the taxonomy reporting. 

Q5. Do you have evidence and/or arguments on potential costs and benefits associated with disclosing the Fees and Commissions KPI?

Given that this KPI is not a technically relevant indicator, it would only create complexity and an additional cost to be produced by banks, without any added value. 

The implementation of the Fees and Commissions KPI would require significant operational complexity across financial institutions. 

For example, large European banking groups (some managing perimeters of 400 to 600+ prudentially-consolidated entities) would need to collect this information across all entities and ensure its formatting compliance with regulatory requirements. While costs vary depending on the entity, this data collection and standardization burden would be substantial and distributed across a large and heterogeneous institutional base. Beyond data collection, banks must assess taxonomy alignment at transaction, sector, and client-specific levels, raising confidentiality concerns around commercially sensitive pricing information. These operational burdens would be particularly disproportionate given the limited relevance and utility of the resulting KPI for users.

Q6.Do you agree with the analysis presented?

We agree with the limits presented by EBA. 

As mentioned before, given the objectives of competitiveness and simplification, we consider that it should be removed. 

In your response, where applicable, please assess whether voluntary disclosure of this KPI would be meaningful and feasible, and hence should be considered.

a. We want to remove it completely, without replacing it by a qualitative disclosure requirement, even on a voluntary basis. We agree with the arguments presented in paragraph 57. 

Given its limitations, we do not consider that qualitative disclosure requirements on the trading portfolio would add value for investors. For audit and assurance purposes, any qualitative disclosure is likely to need to be supported by quantitative evidence and therefore would still involve operational challenges and costs for banks.

The Trading Book KPI is not relevant for Taxonomy reporting. The short-term nature of the trading book is incompatible with the long-term logic of Taxonomy alignment. The TB KPI is only a snapshot at a point in time and may not provide accurate information about liquidity or sustainability intent. This KPI does not reflect how trading is managed, it relies on complex methodologies and data processes which banks do not currently have, and it may yield volatile or non-comparable results between entities. This means it offers limited utility to the market or supervisors compared to its cost. 

b. The response in Q7.a also applies to Q7.b As stated before, we agree with paragraph 57: “Trading Book KPI mainly reflects short-term secondary market activity and may not accurately indicate how credit institutions finance or allocate capital to Taxonomy-aligned activities”. We are aligned with paragraph 66: limiting the scope of this KPI to certain market activities would reduce its relevance. Therefore it is better to delete the KPI rather than having a partial and incomplete image of the trading portfolio. 

Q8. Do you have evidence and/or arguments on potential costs and benefits associated with disclosing the Trading Book KPI?

Given that this KPI is not a technically relevant indicator, it would only create complexity and add a cost to be produced by banks, without any added value.

Q9. Do you agree with the analysis presented and the conclusion to narrow down the investment firms’ KPI?

No comment.

Please explain if you think that other services, e.g. execution of orders on behalf of clients, should be included in the revised KPI.

No comment.

Q11. Do you consider it more appropriate for the KPI to reflect the value of assets covered by the investment services rather than the monetary benefits generated?

No comment.

Q12. Do you agree with the analysis presented and the conclusion to align the grandfathering rules with the approach set out in EU Green Bond Regulation?

We disagree with the conclusion to align the grandfathering rules with the approach set out in EU Green Bond Regulation. The issue at stake is not the length of the grandfathering period (5 or 7 years), but operational complexity and burden both for the counterpart and the financial institution. 

The EU Green Bond Regulation, including the grandfathering clause, is tailored to the relevant activities but it is not applicable to our financing assets whose characteristics differ, regarding maturity for example. Consequently, there is no reason for alignment with the EU Green Bond Regulation, especially as most of the instruments are not subject to this regulation.

We restate our request to apply a full grandfathering clause for all our financing and activities during their entire maturity. 

As regards use of proceeds loans, the financial sector should only have to identify the alignment percentage once for the whole transaction’s lifetime. 

Indeed, if a financial institution had to review the alignment, as per the proposed rule, it would have to obtain an alignment re-assessment from the borrower, which would create a burden for both the client and the financial institution. 

For example, as regards to real estate financing, whether it is for a corporate or a retail client, the assessment should be performed only once when the client provides the EPC.

It is very difficult, and often even impossible, to obtain an updated EPC later on, as there is no legal obligation for it. Some banks tried and did not manage, even with an incentive for the client. 

As regards use of proceeds bonds, the financial sector should rely on the alignment rates disclosed by the issuer, and any update of alignment rates disclosed by the issuer during the bond duration depending on the applicable bond regulatory framework. 

Indeed, the financial sector depends on the EU taxonomy assessment performed and disclosed by the issuer, similarly to general purpose instruments where there is dependence on alignment rates disclosed annually by counterparts. The financial institution does not have a bilateral relationship with the bond issuer, and usually collects alignment rates via a data provider. Moreover, some bonds are not subject to the EU Green Bond Regulation: it would be very complex for a financial institution to get a review of EU Taxonomy alignment assessment, which would not be required from the issuer. 

Equity instruments and general purpose bonds are not concerned by this question, since, as general purpose instruments, they rely on the annual alignment rates disclosed by the issuer.

Q13. Do you agree with the analysis presented and proposed conclusions?

We agree that a weighted KPI aggregating various KPI should not be added to current requirements. Rather than bringing additional value, it could dilute information provided by current KPIs. 

In addition, there is a technical issue related to the weighting factor, as banks’ revenues are managed in terms of Net Banking Income while turnover is not meaningful: from a technical point of view, it is not possible to compute an aggregate KPI since there is no relevant common revenue indicator to be used as a weighting factor.

Moreover, this KPI could result in a double counting of certain activities, as certain individual KPI already consolidate all activities (ex : insurance). 

This KPI does not enable better comparability among credit institutions, as reporting practices and business models are diverging. 

We do not support the development of simplified templates for material subsidiaries. Since these entities will soon be exempted from sustainability reporting and consequently from Taxonomy KPI production at subsidiary level, introducing new templates would create unnecessary burden. Moreover, such templates would contradict the simplification benefits of the forthcoming exemption, as group-level Taxonomy reporting would still incorporate subsidiary KPIs. Maintaining reporting requirements at the consolidated group level only would be more proportionate.

i. Should the KPI disclosed by the parent undertaking, reflecting the group’s main or prevalent activity, be used? If not, what alternative methodology should be applied?

Yes, the main KPI disclosed by the parent undertaking should be used. 

The parent undertaking's primary KPI (the Green Asset Ratio for credit institutions) already reflects the group's principal activity and provides investors with a meaningful, comparable indicator of the institution's alignment with the Taxonomy. We have not identified investor demand for alternative or aggregated KPIs that would deviate from this approach. Creating additional methodologies would introduce unnecessary complexity and reduce the transparency and usability of sustainability information for investors, contradicting the simplification objectives set out in the Taxonomy framework.

ii. In the case of a credit institution-led group, such as a financial conglomerate, should the consolidated KPI disclosed by the parent undertaking also incorporate the assets of the insurance (and non-financial) undertaking, rather than accounting for the insurance (and non-financial) undertaking solely through the equity method? Please justify your answer in terms of feasibility, usability and transparency of sustainability information.

The GAR should be based on the prudential consolidation scope, as per current rules. This provides an appropriate view of financing activity (banking book portfolio), which is credit institutions’ main activity. Therefore, we prefer to incorporate the assets of the insurance undertaking, solely through the equity method.

Integrating all insurance activities would introduce significant methodological complexity and distort the KPI's meaningfulness. The GAR is designed to reflect credit institutions' ability to finance sustainable activities through their lending portfolios. Insurance portfolios operate under different regulatory frameworks, investment objectives, and risk management approaches. Merging these two distinct activities would obscure the sustainability profile of each, reducing the transparency and usability of the resulting metric for investors and stakeholders.

Moreover, the life insurance activity is currently included in the assets under management KPI for assets which are under discretionary management.

Q15. Which KPIs you do think are necessary and should be required for groups with mixed activities where the credit institution is the parent company such as credit institution-led financial conglomerates, credit institution-led financial holding companies and relevant mixed financial holding companies?

As regards credit institutions, additional KPIs beyond the GAR, the Financial Guarantee KPI and the assets under management KPI would not create useful information for external stakeholders and would create an additional burden (which would be not aligned with the simplification and competitiveness objectives).

Q16. Do you agree with the analysis presented and the conclusion that OpEx financing should not be explicitly incorporated in the methodology for calculating financial undertakings’ KPIs? Please provide your rationale for supporting the explicit inclusion of provisions allowing financial undertakings, on a voluntary basis, to use the OpEx KPI disclosed by their counterparties when calculating their own KPIs.

We agree with the analysis presented and the conclusion that OpEx financing should not be explicitly incorporated in the methodology for calculating financial undertakings’ KPIs, whether on a voluntary basis or not.

This would indeed increase the complexity of the framework and create additional burden for the preparers of information with no benefits for the users. In addition, relying on a weighted OpEx-CapEx average KPI would include a bias since CapEx relates to investments, intended to release their utility over multiple years, while OpEx relates to annual expenses.

Q17. Should the credit institution’s AuM KPI (Annex V) and the KPI for asset managers (Annex II) be merged? Please explain why and how, including the content of the information that should be retained in a potential merged KPI.

As indicated by EBA, most assets management firms will not publish anymore information, as the Omnibus package has introduced the exemption of publication for all subsidiaries. If a credit institution has assets management activities (whether operated through a subsidiary or not) the information is already given in the “off balance sheet” template. 

Merging the two templates and requiring credit institutions that do not currently report Annex II KPIs to disclose the full set of information designed for asset managers would broaden the scope and introduce additional reporting obligations, inconsistent with the Omnibus package’s simplification measures.

The template should not be more complicated than the one prevailing for credit institutions. 

Materiality rules should also be maintained at the group level. 

Q18. What are your views on the design of off-balance sheet item reflecting financial guarantees to financial and non-financial undertakings in a potential merging of the asset management activities as presented?

We are not in favor of any complexification of disclosure format for off balance sheet items (financial guarantees and AuM).

Q19. Do you have any additional comments or suggestions to improve, simplify or clarify the disclosure requirements within the scope of this Call for Advice, including through redrafting of instructions, and clarification of definitions, or the streamlining of terminology?

• Loans granted to Households and local administration:  EU Taxonomy assessment to be based only on substantial contribution criteria (usual rationale re lack of available information, client categories not subject to Taxonomy disclosure, …)
• Use of proceeds (UoP) financing: Banks should be able to rely on borrower information of alignment (percentages of eligibility and alignment for each objective), without financial institutions needing to collect supporting evidence or backtesting that each TSC is met
• Remove all flow KPIs: there is no flow accounting approach (no reconciliation link with financial statements) which the calculation could leverage (in particular for debt securities and equities instruments in the asset management KPI); moreover, some cases would require in-depth analysis to avoid misinterpretation (in particular, a positive flow KPI could result from negative flows in both denominator and numerator)

Name of the organization