Response to consultation on Implementing Technical Standards on amended disclosure requirements for ESG risks, equity exposures and aggregate exposure to shadow banking entities
1. Do you have any comments on the proposed set of information for Large institutions?
Align the definition of large institutions between CRR and CSRD. A large institution according to CRR is defined by size and complexity but according to CSRD is defined by balance sheet, net turnover and number of employees.
2. Do you have any comments on the simplified set of information for Other listed institutions and Large subsidiaries?
Harmonisation of rules and definitions between CRR, CSRD, and the EU Taxonomy on classifications and disclosure obligations is essential.
There is increasing alignment between the Capital Requirements Regulation (CRR), the Corporate Sustainability Reporting Directive (CSRD), and the EU Taxonomy to ensure consistent sustainability reporting and classification across the financial sector.
For example, a financial institution that has issued a financial instrument (such as a bond or loan) is required to publish the Green Asset Ratio (GAR) and fais under the scope of the EU Taxonomy disclosure obligations.
3. Do you have any comments on the simplified set of information proposed for SNCI and other non-listed institutions?
We welcome the introduction of a simplified set of Pillar III disclosure requirements for non-listed institutions such as the SNCI. Given that the new thresholds introduced by the Omnibus meant that we did not have to report under Taxonomy, we feel it is appropriate to remove the taxonomy requirement (GAR) in Pillar III.
4. Do you have any comments on the proposed approach based on materiality principle to reduce the frequency (from semi-annual to annual) of specific templates (qualitative, template 3, and templates 6-10) for large listed institutions?
The frequency is not the most important. Semi-annual reporting could bring signal to anticipate any deviations. The most important thing is the accuracy and availability of data requested. Data availabilities and data collection are one of the most challenging of the reporting exercise.
5. Do you have any comments on the transitional provisions and on the overall content of section 3.5 of the consultation paper?
No comment
6. Do you have any comments on the proposed amendments to Table 1 and Table 3?
Since the quantitative objectives of the transition plan were removed for the sake of simplicity, it is important to maintain the qualitative aspect that defines the transition plan and the company’s climate strategy.
Additional clarification on what is expected from each disclosure of Table 1A qualitative information would be helpful, as the information seems to be high-level. The current instructions could benefit from more specific guidance regarding the expected length, depth, and structure of the narrative.
7. Do you have any further suggestions on Table 1A?
Tables 1.A and 3 currently require the reporting of qualitative information in a free format.
The annex templates should aim to rationalise and harmonise the information and data reported. The use of free format increases the difficulty for financial market participants to compare disclosures. We recommend linking Table 3 to existing frameworks (e.g. ESRS), or alternatively, removing the table. The information required in Table 1.A is too generic and is already covered by the institution’s risk management strategy.
8. Do you have any comments on the proposed additions and deletions to the sector breakdown?
No comment
9. Do you have any views with regards to the update of the templates to NACE 2.1?
Increasing granularity in the reporting process is a good practice. However, the banking sector continues to face a lack of ESG-related data. The NACE nomenclature covers all economic sectors, but banks still face significant challenges in gathering company-level data — especially for non-listed /small companies.
The proposed omnibus package (CSRD, CSDDD, and the EU Taxonomy) purposes to bring greater simplicity and pragmatism to the overall framework. We suggest to amend any modification of momenclatura. A new NACE code will conduct banking sector to investment into IT system and training cost.
10. Do you have any views with regards to NACE code K – Telecommunication, computer programming, consulting, computing infrastructure and other information service activities, and in particular K 63 - Computing infrastructure, data processing, hosting and other information service activities, whether these sectors should be rather allocated in the template under section Exposures towards sectors that highly contribute to climate change?
No comment
11. Do you have any comments on the inclusion of row “Coverage of portfolio with use of proxies (according to PCAF)”?
No comment
12. Do you have any further comments on Template 1?
Permit SNCIs to omit reporting on exposure classes that represent a very small share of the total balance sheet, provided a justification is included.
13. Do you have any comments or alternative suggestions for SNCIs and other institutions that are not listed, regarding the sector breakdown?
No comment
14. Do you have any additional suggestions how to adjust Template 1A for SNCIs and other institutions that are not listed?
No comment
15. Do you have any further comments on Template 1A?
Permit SNCIs to omit reporting on exposure classes that represent a very small share of the total balance sheet, provided a justification is included.
16. Should Template 2 in addition include separate information on EPC labels estimated and about the share of EPC labels that can be estimated?
EPC labels are defined by each individual state in Europe, and we observe discrepancies in label allocation. However, the classification based on kWh/m² relies on scientific measurements.
17. Should rows 2, 3 and 4 and 7, 8 and 9 for the EP score continue to include estimates or should it only include actual information on energy consumption, akin to the same rows for EPC labels?
It seems like the “of which” rows and columns are sufficient to clearly identify the share of estimates in the “data”.
18. Do you have any comments on the inclusion of information on covered bonds?
The inclusion of information on covered bonds is already addressed under other regulations, and additional data collection would entail significant costs and operational challenges. Moreover, such information could be complex for readers of Pillar III disclosures, particularly in the event of defaults within the cover pool.
19. Do you have any comments on the breakdown included in columns b to g on the levels of energy performance?
The proposed breakdown is acceptable; however, the market requires clear explanations and established market practices regarding estimations. The use of estimated performance (column G) is particularly challenging in day-to-day banking operations.
20. Do you have any further comments on Template 2?
The template has three underpinning material weaknesses:
- EP labels are an inadequate risk metric. They are based on climate zones which are changing quickly due to climate change.
- EP labels are not comparable between two european countries.
- The templates implicitly assumes that a bank would always get a score, and often the related EP label. Sometime banks obtain label and not the score, either because the EPC is old or because the score simply doesn’t exist. The estimated EP or score must be clarified and considered within the validation rules.
21. Do you have any comments on Template 3?
Template 3 must be clearer and simpler for banks. The 'target' section should provide more detailed guidance and explanations — for example, for columns H and I — to help bankers use the template correctly. The banking sector continues to face challenges in gathering data from non-listed companies.
22. Do you have any comments with the proposals on Template 4 and the instructions?
- This template could be improved by drawing on the logic of the presentation of large exposures. For each TOP20 entity for which an exposure is reported, details of its subsidiaries should appear. For each entity, the NACE code and the country of incorporation should be included. This would make it easier to understand the financing structure of the group and would highlight the fact that financing a subsidiary of a carbon-intensive entity could either (1) also be carbon-intensive or, on the contrary, (2) be a ‘green’ subsidiary within the group in question.
- it can be useful to include in a column the % of green bonds’ exposures as portion of the gross carrying amount. The financial industry can still finance those carbon-intensive companies, while making sure that the money goes into the right projects.
23. Do you have any views on whether this template could be improved with some more granular information in the rows, by requesting e.g. split by sector of counterparty or other?
No comment
24. Do you have any further comments on Template 4?
No comment
25. Do you have any comments on the proposal using NUTS level 3 breakdown for Large institutions and NUTS level 2 for Other listed institutions and Large subsidiaries? Would NUTS level 2 breakdown be sufficient for Large institutions as well?
Given that physical risks can be very localised, it seems appropriate to start with a more detailed breakdown. All the more so as the majority of banks are subject to AnaCredit, which already uses NUTS3.
26. Do you have any comments on the instructions for the accompanying narrative and on whether they are comprehensive and clear?
No comment
27. Do you have any further comments on Template 5 and on its simplified version Template 5A?
Columns h, I and j provide more clarity.
28. Do you have any comments on the proposal to fully align templates on the GAR, that is, templates 7 and 8, with those under the Taxonomy delegated act by replacing the templates with a direct cross reference to the delegated act?
Templates 7 and 8 must provide clarity for users. For the time being, GAR and Pillar III generates lot of confusions.
29. Do you have any comments on the proposal related the BTAR and to keep it voluntary?
BTAR must remain on voluntary basis.
30. Do you have any comments regarding the adjustments to template 10?
The maturity of debt could be added for reinforcing the Asset-Liabilities Management.
31. Do you have any further comments on the Consultation Paper Pillar 3 disclosures requirements on ESG risk?
BTAR must remain voluntary
32. Are the new template EU SB 1 and the related instructions clear to the respondents? If no, please motivate your response.
N/A
33. Do the respondents agree that the new template EU SB 1 and the related instructions fit the purpose and meet the requirements set out in the underlying regulation?
N/A
34. Are the amended template EU CR 10.5 and the related instructions clear to the respondents? If no, please motivate your response.
No comment
35. Do the respondents agree that the amended template EU CR 10.5 and the related instructions fit the purpose and meet the requirements set out in the underlying regulation?
No comment
36. Do the respondents consider that the “mapping tool” appropriately reflects the mapping of the quantitative disclosure templates with supervisory reporting templates?
No comment