Response to consultation on amending Guidelines on the appropriate subsets of exposures in the application of the systemic risk buffer
Q1. Do you agree that the proposed use of more granular economic activity classifications (including NACE level 2 or more granular levels where necessary) is appropriate and suffi-cient to enable authorities to effectively target exposures subject to climate transition risk while limiting unintended consequences for transition financing? If not, please explain and suggest alternative approaches or safeguards.
NA
Q2. Do you consider that introducing an additional subdimension related to Energy Perfor-mance Certificates (EPCs) or energy consumption buckets within the risk profile would be appropriate to better capture climate-related risks? If so, please comment on its relevance and potential implementation challenges, as well as data availability and possible proxies that relevant authorities could consider.
ZIA expresses reservations regarding the linkage of additional subdimensions related to EPCs or energy consumption categories to capital requirements, noting that such an approach would not adequately address the underlying causal risk factors and would not satisfy the supervisory principle of risk sensitivity. Conversely, there are considerable conceptual and practical concerns associated with this method.
The EPC in its current form was designed as an informational instrument on energy efficiency (with a static and retro perspective). They primarily reflect estimated or observed energy demand or consumption and therefore do not directly measure climate transition risk. Emissions and transition exposure are strongly influenced by the underlying energy carrier, its emission factor, and the decarbonisation trajectory of the energy system. As a result, buildings within the same EPC class may exhibit materially different carbon intensities and transition risks. Energy efficiency, as documented by an EPC, is therefore not equivalent to climate risk, and the link to prudentially relevant risk drivers remains weak and indirect.
Moreover, EPCs or energy consumption do not capture physical climate risks such as flooding, heat stress, storms or drought exposure, which are location-specific and independent of a building’s energy efficiency class. Using EPC classifications as a proxy for physical risks would therefore lead to systematic misclassification and undermine the principle of risk sensitivity that underpins prudential regulation.
From a practical standpoint, data availability and quality constraints represent a major obstacle, particularly in Germany. A substantial share of EPCs in existing portfolios is outdated, methodologically inconsistent (due to several legal revisions) or legally only weakly enforceable. The coexistence of demand-based and consumption-based EPCs leads to very large deviations in results, including significant dispersion within the same EPC category for comparable buildings. These inconsistencies limit comparability, reduce reliability at portfolio level, and raise serious concerns about using EPC data for capital requirement purposes.
Against this background, linking capital requirements to an informational instrument that is heterogeneous, partially obsolete and only limitedly legally robust does not appear appropriate. Capital requirements are among the most intrusive supervisory tools and should therefore be grounded in stable, verifiable and forward-looking risk measures. This problem is further amplified for internationally active banks, as EPC methodologies, thresholds and legal frameworks differ substantially across (European) countries, creating cross-border distortions unrelated to underlying risk.
This assessment does not imply that EPCs are irrelevant in principle. If, in the future, EPCs were fully harmonised, legally robust, consistently applied in Europe and focused more clearly on emissions intensity and transformation pathways, they could play a supporting role within a broader climate risk framework – which is already an increasingly considered in banks’ ESG risk management.
Q3. Do you consider the proposed extension of geographical granularity (including the use of LAU level) appropriate for identifying exposures subject to climate physical risks? Please comment on the relevance of the proposal and potential implementation challenges, as well as data availability and possible proxies that relevant authorities could consider.
NA
Q4. Do you agree with the proposed flexibility to combine different dimensions (e.g. type of counterparty, economic activity, geographic area, type of collateral) when defining subsets of sectoral exposures for SyRB purposes? In your view, does this flexibility sufficiently sup-port risk sensitivity while preserving transparency and comparability across jurisdictions?
NA
Q5. Do you consider the strengthened provisions on information sharing and the use of harmonised data sources adequate to facilitate the assessment and reciprocation of SyRB measures across Member States? Please indicate any remaining obstacles to effective reciprocity and how they could be addressed.
Yes, a homogenous understanding and data handling would increase the availability of data. While the process of data collection may still entail increased responsibilities for parties not typically required to report information, service providers could develop solutions to accommodate both data providers and/or recipients. Currently, the availability of solutions is also limited due to the absence of established standards.
Q6. Do you have any additional comments on these draft Guidelines amending EBA/GL/2020/13 on the appropriate subsets of sectoral exposures to which competent or designated authorities may apply a systemic risk buffer?
NA