Response to consultation on draft ITS amending Commission Implementing Regulation (EU) 2024/3117 regarding Credit Risk and IFRS 9 Benchmarking reporting
General 1: Are the instructions and templates clear to the respondents? If not, what should be clarified?
Yes, the instructions are clear.
General 2: Do the respondents identify any discrepancies between these templates and instructions and the calculation of the requirements set out in the underlying regulation?
NA
General 3: Do the respondents agree that the amended ITS on Supervisory Reporting allows to fulfil the requirements and purpose of the Article 78 of the CRD?
Yes, I agree but the EBA could consider complementing Section 7 with a technical annex, supervisory handbook or illustrative guidance providing examples of how climate-related risk mitigation measures may be reflected in prudential risk assessments.
Rather than prescribing specific lending strategies, such guidance could describe illustrative risk transmission and risk mitigation pathways associated with financing investments that are aligned with the objectives of the EU Taxonomy and support the transition towards a climate-neutral economy.
Illustrative examples could include financing for:
• renewable energy self-generation (e.g. rooftop photovoltaic systems) for energy-intensive SMEs and corporates;
• energy efficiency renovations of residential and commercial buildings;
• battery energy storage systems;
• heat pumps and low-carbon heating technologies;
• electrification of industrial production processes;
• other climate adaptation or decarbonisation investments that demonstrably reduce borrowers' exposure to transition or physical climate risks.
The introduction of the Climate Risk Module in the 2027 EU-wide Stress Test represents a significant and welcome step towards the progressive integration of climate-related and environmental risks into the European prudential framework.
The decision to maintain the exercise as an exploratory and learning-oriented module without direct prudential consequences is particularly appreciated, as it creates an opportunity for methodological innovation, experimentation and evidence gathering while preserving the robustness and comparability of the core stress-testing framework.
At the same time, the introduction of the climate module offers an opportunity to reflect on the future evolution of climate-related stress testing.
The current framework primarily assesses how climate-related and transition shocks affect banks through their impact on borrowers, sectors and financial risk parameters. In other words, it focuses on the transmission of climate-related risks from the external environment to banks' balance sheets.
While this perspective is essential, it captures only one side of the relationship between climate risk and financial intermediation.
Banks are not merely passive recipients of climate-related shocks. Through their lending and capital allocation decisions they influence the resilience, adaptive capacity and transition pathways of households, businesses and local economies. Financing investments that improve energy efficiency in buildings, reduce dependence on fossil fuels, drive the electrification of transportation, strengthen climate adaptation or enhance the resilience of critical infrastructure can contribute to reducing future credit risk and improving the resilience of borrowers.
For this reason, future methodological developments could progressively complement the assessment of the resilience of banks with a broader understanding of the resilience generated through banks' financing activities.
In particular, the current methodology captures the adverse effects of transition and physical risks, but does not explicitly consider the stabilising effects that may arise from financing investments that mitigate those risks. Examples include investments in renewable energy self-generation, energy efficiency improvements, battery storage systems, heat pumps, electrification of industrial processes and other activities supporting climate adaptation and decarbonisation objectives.
These investments should not necessarily be viewed as business expansion initiatives. In many cases, they represent economically rational risk mitigation measures that reduce exposure to energy price volatility, improve operating cash flows, strengthen debt-servicing capacity and ultimately enhance the resilience of borrowers and lenders alike.
In this regard, the EBA could consider complementing Section 7 with illustrative guidance describing risk transmission and risk mitigation pathways associated with transition-enabling and adaptation-related investments. Such examples would not prescribe business strategies or imply preferential prudential treatment. Rather, they would support supervisory convergence by illustrating how climate-related risk mitigation can be identified, evidenced and consistently incorporated into prudential risk assessments.
More broadly, future iterations of the climate risk framework could gradually evolve towards a stronger territorial and geospatial dimension.
General 4: what is the information (please refer to single columns) that you see as particularly costly to be provided? Please provide detailed information about the implementation and running costs of the proposed changes, also compared to the current total costs.
NA
General 5: what is the reporting level for banking groups that you deem more appropriate?
NA
CR 1: Do you foresee any issues with supplementing the sample of counterparties listed in C 100.00 by the Large Exposures counterparties reported in the Template C 27.00 at the same reference date in order to expand the sample of low default counterparties for the reporting for template C 101.01/.02?
NA
CR 2: Do you identify any errors in the list of counterparties in C 100.00? If so, please report it to us.
NA
CR 3: Do you foresee any issues with the transfer of the portfolio/model split from the former template C 105.02 to the template C 101.01 and the new template C 102.01? Do you agree with the EBA’s assessment that the portfolio/model split in the new template C 102.01 is the preferred option compared to designing a separate template increasing the reporting details of the former templates C 105.01 and C 105.02?
NA
CR 4: Do you think it is possible to provide the details of the impacts of the RWEA add-ons and MoCs (columns 0203, 0204, 0205 of Template C 102.01) at the required segmentation level?
In principle, the requested information can be produced where institutions maintain an integrated data architecture linking internal model outputs, supervisory reporting and portfolio-level risk aggregation.
However, for many institutions the attribution of RWEA add-ons and Margins of Conservatism to the level of granularity requested may require significant methodological assumptions and manual allocation keys, as these adjustments are often calculated at model or portfolio level rather than at the individual segmentation required for stress testing.
A phased implementation, accompanied by additional technical guidance and illustrative allocation principles, would promote greater consistency and comparability across institutions while limiting unnecessary implementation costs.
Where the EBA decides to collect these data, it could also explore whether future reporting could distinguish between RWEA add-ons arising from model uncertainty and those reflecting recognised climate-related or transition-related sources of risk. Such information could support future methodological developments on the interaction between prudential capital requirements and climate risk management.
CR 5: Do you agree with the proposed simplification in the reporting for column 0202 (RWEA Standardised) of the template C 102.01? Do you deem the segmentation level for which the information is requested sufficient to highlight the key differences between the IRB approach and the Standardised Approach?
NA
CR 6: The split by collateral type (column 0061 of new template C 102.01) differs from the split used in the current Benchmarking portfolios. Do you foresee any issues or disadvantages with the new definition and instructions as compared to the ones currently in use?
I agree with the proposed classification for 2027, but I would suggest that, in future iterations of the framework, the concept of collateral could become more risk-sensitive, taking into account the climate resilience of the underlying asset and the investments financed by the bank that enhance its value over time.
In the longer term, the prudential role of collateral could evolve from being regarded solely as an ex-post loss mitigation instrument, towards also recognising its contribution to ex-ante resilience, where lending finances improvements that strengthen the long-term economic value and climate resilience of the pledged asset.
CR 7: Do you see material obstacles in providing the information required by the column 0302 of the template C 102.01 (Long-run average realized loss rate of assigned facility grades)?
While the requested information is generally available, its prudential interpretation should take into account that long-run historical loss rates may become less representative where borrowers' risk profiles are materially altered by structural transition processes, including investments enhancing climate resilience and energy independence.
CR 8: Do you see material obstacles in providing the information required by the new loss rate template (C 104.00)? Would alternative measures of loss rates be more appropriate?
NA
CR 9.1: The split by facility type (column 0062 of template C 102.01) is designed to collect information on the functioning of the CCF models. The classification into buckets (facility types) of off-balance-sheet items is based on Annex I of Regulation (EU) No 575/2013. Do you think there exist other classifications (for example product types) of off-balance-sheet items that would be more useful for representing the CCF models?
NA
CR 9.2: Template C 101.01 and C 102.01 propose two alternatives to collect the information on the CCF, either by one column (column 0110 in C 101.01 and column 0120 in C 102.01) or by two separate columns (columns 0111/0112 in C 101.01 and columns 0121/0122 in C 102.01). Which of these reporting alternatives do you prefer?
NA
CR 10: Do you support the use and the proposed granularity of the common master scale to limit the number of reported rating grades? What alternative would you propose.
NA
IFRS9 1: Do you agree with the proposed definition of SA institutions as relevant for the benchmarking reporting?
NA
IFRS9 2: Do you agree with the proposal to refer to SA exposure classes in defining the portfolios for SA institutions?
NA