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.
NA
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.
As stated above and in relation to Question 6, we generally do not support revisions to EBA/GL/2020/13. As a safeguard, however, we would like to highlight that any potential changes must avoid introducing new duties for credit institutions, whether directly or indirectly. Especially reporting requirements are already excessive and should be scaled back rather than expanded. In particular, obliging institutions to generate additional datasets or to submit them on a recurring or ad hoc basis would undermine efforts to streamline supervisory rules and reduce administrative complexity.
It should also be noted that more detailed geographic breakdowns offer only marginal added value for assessing physical climate risks such as flooding or coastal surges. Numerous hazards, including storms, cannot be reliably inferred from location granularity alone. In particular, the proposed approach of determining the risk buffer at a local level raises methodological questions. Ultimately, the impact of the various local ESG risk drivers on financial risks must be assessed and aggregated at national level in order for this to be reflected in the systemic buffer.
Evaluating climate risks at LAU level would necessitate substantially more granular data processes and is difficult to justify from a cost-benefit standpoint. We also doubt that this would capture risks appropriately at all. Instead, institutions need to assess on a case-by-case basis how climate risks affect their specific exposures.
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.
NA
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?
General comments
The EACB welcomes the opportunity to comment on the EBA’s draft Guidelines on the appropriate subsets of sectoral exposures to which competent or designated authorities may apply a systemic risk buffer (SyRB). We recognise the rationale for amending EBA/GL/2020/13 in order to enable potential SyRB measures to better capture climate-related risks, in line with Directive (EU) 2024/1619 of the European Parliament and of the Council of 31 May 2024 amending Directive 2013/36/EU as regards supervisory powers, sanctions, third country branches, and environmental, social and governance risks (CRD VI). Nevertheless, the EACB questions whether the timing of this regulatory initiative is appropriate in the current context. On the one hand, the effectiveness of other EBA initiatives, such as the review of the Guidelines on SREP, ESG risk management, or scenario analysis, is not yet known, particularly where the application date has recently started or will only start in 2027. On the other hand, the draft Guidelines are being introduced at a moment when the broader European policy debate is focused on simplification, proportionality and competitiveness. In this context, it would have been preferable to reflect further on whether this initiative is aligned with those wider policy objectives. The European Commission is actively working to reduce regulatory complexity and strengthen the competitiveness of the EU financial sector, as also confirmed by the recent consultation on the competitiveness of the EU banking sector. Against that background, amendments to a macroprudential tool that introduce additional layers of sectoral granularity, particularly in relation to climate risk, appear difficult to reconcile with the overall initiative of the legislators. We would also like to reiterate that the SyRB, which represents a deviation from the Basel standards, is not implemented in other major jurisdictions and, as such, raises concerns regarding the consistency of the international level playing field. A further concern relates to the structural uncertainty surrounding the SyRB itself. The EACB notes that the EBA is proposing to amend a macroprudential buffer instrument that may not continue to exist in its current form in the near future. In this context, the EACB draws attention to the proposal recently put forward by the ECB to fundamentally redesign the EU macroprudential buffer framework. The ECB has proposed consolidating the existing suite of capital buffers into two overarching instruments:
• A Non-Releasable Buffer (NRB), which would merge the Capital Conservation Buffer and the G-SII/O SII buffers, calibrated as the sum of a 2.5% floor and the maximum of the applicable systemic institution buffer; and
• A Releasable Buffer (RB), which would merge the Countercyclical Capital Buffer (CCyB) and the Systemic Risk Buffer with the objective of increasing resilience against both cyclical and structural systemic risk.
Under this proposal, the SyRB as a standalone instrument would cease to exist. It would be absorbed into the new Releasable Buffer, whose design, scope and calibration would follow a fundamentally different logic.
Against this backdrop, we believe that it would not be appropriate to allocate regulatory and institutional resources to amend the SyRB Guidelines at this time. Any new guidance developed now risks becoming quickly obsolete. The EACB therefore urges the EBA to await the outcome of the ongoing policy discussions on macroprudential reform before proceeding with these amendments.
Finally, we would like to see greater consideration given to the role of financial institutions in this regard. It is important to remember that climate risks are already covered at the microprudential level and must be dealt with by all credit institutions on an individual basis. The SyRB, does not appear suited to address such risks, also in consideration of the fact that they are generally considered as risk drivers that manifest through the typical categories of financial risk (credit, market, operational), and not as stand-alone risk classes for capital determination purposes. We believe that using the SyRB in this manner would ultimately create unnecessary duplications and regulatory obligations.
Specific comment related to Q6
According to Article 133(1) CRD VI, a systemic risk buffer might be imposed in order to prevent macroprudential or systemic risks, including systemic risks arising from climate change, if not already covered by CRR requirements or Articles 130 and 131 CRD. This requirement provides a considerable discretionary leeway for the competent authorities. In addition, the draft Guidelines provide greater flexibility in the use of multiple combinations of dimensions. For banks, this can reduce the predictability of supervisory practices.
In using their toolkit, NCAs should always bear in mind that macroprudential measures have noticeable consequences for the economy, which should be carefully considered. If national authorities tailor SyRBs to sectors or regions particularly vulnerable to climate risks, this could make financing more expensive or scarce in those industries or areas.
Recital 43 CRD VI states that only climate change risks that have the potential to have serious negative consequences for the financial system and the real economy in Member States. However, the inner difficulty of determining the way in which climate events (including tail events) play out in practice (e.g. in terms of timing, extent, public mitigation measures taken to tackle the risk build-up or address the consequences) can imply a systematic overshoot (or possibly an underestimation) of the required capital – ultimately questioning the use of the SyRB measure for such purpose altogether. Moreover, as stated above, climate and environmental risks are not treated as stand-alone risk classes for capital determination purposes.
A broad set of instruments is already offered under Pillar 1 and Pillar 2 of the existing prudential framework, particularly through the Supervisory Review and Evaluation Process (SREP), which enables supervisors to tackle both firm-specific and system-wide risks in a focused and proportionate way. Consequently, institutions must evaluate their exposure to climate-related risks individually. In light of this, it is both appropriate and sufficient to address climate risks through the microprudential framework rather than the SyRB.