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:

Q2. Do you agree with the analysis presented?

Yes, we do generally agree with the analysis presented.

We would however make the general comment that, in our view, the intrinsic limitations to the relevance of the KPI as summarized in the sub-chapter 2.1.4 (paragraphs 29-32) as well as the additional considerations outlined in the paragraphs 34 and 35 are pervasive enough for discarding upfront the option of maintaining the requirement for the Fees and Commissions KPI, even in a narrowed-down form that would anyway allow   a large majority of EU credit institutions (about 84% according to Figure 3 in Annex II) not to report it, by reference to the 10% de minimis rule. Therefore, we do not fully understand why, in paragraph 36, maintaining a narrowed-down requirement for the FCI KPI is nonetheless presented as an alternative option (option b) to full removal (option a).  We also agree that the KPI may give rise to confidentiality and data privacy concerns, in particular where disclosures are based on a limited number of transactions or counterparties.

 At a more detailed level, we have two additional specific comments:

• Paragraph 17 seems to describe different approaches for determining the amount to be taken in FCI KPI’s numerator, depending on whether the use of proceeds is known or not, although in both cases weighing by proportions or KPIs of the counterparty seems necessary (which is not the case for GAR as soon as the use of proceeds is known). More precisely, Paragraph 17 includes the following statement: “The numerator of the KPI includes the fees and commissions income from services provided for counterparties’ Taxonomy-aligned economic activities. When use of proceeds is known, this is estimated by weighing the fees and commissions income associated with each service with the proportion of turnover and CapEx associated with counterparty’s Taxonomy-aligned economic activity linked to that service as disclosed in accordance with Taxonomy disclosure requirements. When the use of proceeds is unknown the weight to be applied to the fees and commissions income is the overall Taxonomy alignment KPI of the counterparty’s activities.” We do not understand where in Annex V to the EU Taxonomy Disclosures Regulation this distinction and the arising two distinct approaches are outlined as such. Annex V, chapter 1.2.3, requires that the numerator of the FCI KPI is determined in one single way irrespective of whether the use of proceeds is known or not, namely: “The numerator of the KPI shall include the fees and commissions income as specified in Implementing Regulation (EU) 2021/451 Annex V, paragraph 284 from services other than lending and asset management provided to undertakings, associated with Taxonomy-aligned economic activities. This shall be estimated by weighing the fees and commission income from each counterparty with the proportion of turnover and CapEx associated with Taxonomy-aligned economic activities of the undertaking contributing to the relevant environmental objective as disclosed by the undertaking in accordance with Article 8 of Regulation (EU) 2020/852. For financial undertakings, the ratio for the counterparty to be applied shall be the same as for the KPIs for these undertakings.”. Moreover, if we understand it correctly, the above quoted statement from Paragraph 17 to the present Consultation Paper would result in additional datapoints to be collected from the EU Taxonomy disclosures of the related counterparties, namely alignment “sub-KPIs” attributable to specific activities or investments. In making this comment, we acknowledge that, unlike the layout of Template 6 as per the original Annex VI, the “simplified” layout of Template 6 features a specific column (‘j’) dedicated to “use of proceeds known” ratios. In absence of any applicable related requirement in Annex V, we have internally concluded that this column was erroneously included.
• We believe that the paragraph 25 describes wrongly how the 10% de minimis materiality check should be performed in assessing the possibility of not disclosing the Fees and Commissions KPI on immateriality grounds   when it states: “Omnibus simplification package sets a materiality threshold for the Fees and Commissions KPI, which allows the omission of related information when the cumulative value of that income is below 10% of the value of all fees and commissions income related to specific economic activities that are included in the denominator of the KPI.” This is because, according to the revised Annex V Article 4, paragraph 1f, the reference denominator amount for this 10% test shall be the “total net turnover of the institution”. Moreover, elsewhere in this consultation paper, this same reference denominator amount seems to be differently referred to as “total operating income”. We acknowledge that the above quoted text featured in the paragraph 25 accurately quotes Article 4 1d, but our understanding is that the presented analysis and the related annexed statistics address the topic of the materiality of the FCI KPI altogether, not the topic of individual income deals that can be disregarded in the process of the FCI KPI calculation due to cumulatively representing up to 10% of the total population of deals relevant for this KPI.

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

As indicated in our response to Q2, we strongly support option (a): removing the Fees and Commissions KPI from the Taxonomy disclosure requirements. Option (b) is not viable, even with a narrowed scope, for the following reasons:

• The view according to which, by providing one or another of the four services that would stay in the scope of this KPI, credit institutions position themselves as enablers of environmentally sustainable finance is debatable. Moreover, two of these four services (namely: advisory services on M&A and distribution of third parties’ products to own customers) are not necessarily always capital market related.
• When removing various purely transactional items of fee and commission income, the remaining four items can be reasonably expected to be immaterial on an indefinite basis for a large majority of EU credit institutions by reference to the 10% de minimis criterion, depriving it upfront of relevance and informational value for a large majority of potential users while, on the other hand, all related credit institutions would still need to ensure the technical readiness needed for reporting the narrowed-down KPI, taking also into account the potential inherent volatility of the underlying fee income items (aspect further addressed below).
• The retained four fee income items are customarily positively correlated to the magnitude of the related transaction. Moreover, such transactions are relatively irregular, as they differ from day-to-day business with customers of standard banking products. Consequently, relatively high volatility in the related fee income from one year to the next can’t be ruled out, which would result in limited possibilities to meaningfully analyse or forecast the development in this KPI.
• The proposed simplifications to FINREP (expected to apply from Q3 2027), notably to the template F 22.1 “Fee and commission income and expenses by activity”, would result in the removal of several rows, all the four items that would stay in the narrowed scope of the Fees and Commissions KPI being affected in the sense of a loss of granularity, hence a loss of capacity of reconciling and correlating the FINREP simplified template F 22.1 to the would-be narrowed-down EU Taxonomy Template 6. Moreover, the potential benefit arising from the simplified FINREP template F 22.1 might be lost given the need for deeper granularity that would still be needed for EU Taxonomy Template 6 reporting purposes.

We do not believe that turning the Fees and Commissions KPI (Template 6) into a voluntary disclosure is meaningful either. That would potentially introduce randomness and inconsistency, both across reporting periods and across entities. Also, it would turn the recently introduced concept of 10% de minimis with respect to EU Taxonomy KPIs partly redundant. Moreover, it would change the meaning of the concept of “voluntary” as used so far in sustainability reporting matters, which has been defined by reference to being obligated or not to prepare a sustainability statement altogether, not by reference to choosing, as an obligated undertaking, what specific requirement to apply and what not.

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’.

No. Since we support removing the Fees and Commissions KPI altogether, no additional FINREP Template 22.1 items should be included. Most of the additional items are transactional in nature and hardly relatable to environmentally sustainable financing.

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

While admitting that, due to potential synergies, the incremental costs with ensuring technical readiness for disclosing the Fees and Commissions KPIs (Template 6) might turn to be comparatively less than those originally incurred with ensuring disclosure of the GAR itself and of the other already required KPIs (Templates 0-5), we believe that such incremental costs would still largely exceed any additional benefits that the users of EU Taxonomy disclosures would be provided with by the handful of credit institutions that would need to report it for any given annual period, for the reasons outlined in answering the preceding questions. 

In other words, we believe that the cost/benefit ratio associated with the Fees and Commissions KPI would be particularly poor, both from a preparer and from a user perspective.

Q6.Do you agree with the analysis presented?

In general, we do agree with the analysis presented, notably with the idea that the only potentially justifiable way to somehow connect trading activities to environmentally sustainable financing is via trading that, purposely or not, improves the liquidity of the markets where environmentally sustainable securities are traded.  At the same time, we believe that this connection is not compelling enough for justifying the maintaining of the Trading KPI reporting requirement, even in this narrowed down form. 

Going into further specifics of the presented analysis, we have the following additional comments:

• We believe that the analysis should have underlined, as additional limitation to the relevance and adequacy of the Trading KPI, the fact that, unlike all other EU Taxonomy KPIs defined by Annex V to the EU Taxonomy Disclosures Regulation (GAR, FinGuar, AuM KPI, FCI KPI), it is designed in such a way that it can’t be traced back (hence reconciled) to any FINREP reporting template, whether that would be the statement of financial position, the statement of profit or loss or any notes table. That’s because its scope is defined to be a population of transactions of purchases and sales throughout the reporting year (at the applicable point-in-time selling and respective purchase prices, according to our understanding of what the “fair value” requirement means in this context).  As such, these are not reflected neither in year-end’s statement of financial position (where any purchases not yet fully resold would be measured at year-end’s market value) nor in the statement of profit or loss for the year (which only captures the related realized or unrealized trading gains or losses, moreover on a net basis only). We see this impossibility of any reconciliation against accounting reporting as a major limitation in implementing internal controls that would ensure quality and auditability of the Trading KPI against accounting (FINREP) reporting.
• Paragraph 41 of the analysis, in describing the new materiality check approach (10% de minimis) with respect to EU Taxonomy KPIs in general and the Trading KPI in particular, as brought over by the Omnibus simplifications (revised delegated act), refers to “10% of their total turnover or total assets”. In our reading, Annex V Article 4, paragraph 1f of the revised delegated act refers in this respect strictly to the “total net turnover of that credit institution”. Against this background, we also don’t understand why the presented analysis features materiality considerations and statistics centred around total assets as reference amount and using trading book as a balance-sheet snapshot for the numerator of the materiality check ratio. 

Paragraph 43 of the analysis, similarly to paragraph 17 of the corresponding analysis addressing the FCI KPI, seems to describe different approaches for determining the amount to be taken in Trading KPI’s numerator, depending on whether the use of proceeds is known or not, although in both cases, weighing by proportions or KPIs of the counterparty seems necessary (which is not the case for GAR as soon as the use of proceeds is known). More precisely, Paragraph 43 includes the following statement: “When the use of proceeds related to the underlying economic activity is known, the numerator of the KPI is estimated by weighting the gross carrying amount of instruments purchased and/or sold with the proportion of turnover and CapEx associated with Taxonomy-aligned economic activity of the undertaking (issuer) contributing to the relevant environmental objective as disclosed by that undertaking (issuer) in accordance with Taxonomy Regulation. When the use of proceeds is unknown the ratio to be applied is the overall taxonomy alignment KPI of the undertaking’s activities”. We do not understand where in Annex V to the EU Taxonomy Disclosures Regulation this distinction and the arising two distinct approaches are outlined as such. Annex V, chapter 1.2.4, requires that the numerator of the Trading KPI is determined in one single way irrespective of whether the use of proceeds is known or not, namely: “The part of the GAR numerator for trading portfolio shall be estimated by weighting the gross carrying amount of debt securities and equity instruments purchased and/or sold from each counterparty with the proportion of turnover and CapEx associated with Taxonomy-aligned economic activities of the undertaking contributing to the relevant environmental objective as disclosed by that undertaking in accordance with Article 8 of Regulation (EU) 2020/852 and this Regulation. For financial undertakings, the ratio for the counterparty to be applied shall be the same as for the relevant KPIs for these counterparties.”. Moreover, if we understand it correctly, the above quoted statement from Paragraph 43 to the present Consultation Paper would result in additional datapoints to be collected from the EU Taxonomy disclosures of the related counterparties, namely alignment “sub-KPIs” attributable to specific activities or investments. In making this comment, we acknowledge that, unlike the “simplified” Template 6, neither the original nor the “simplified” layout of Template 7 features any specific column dedicated to “use of proceeds known” ratios.  We are additionally of the opinion that confusion might arise from the fact that amounts relevant for Template 7 are, according to template’s header, the “fair values” (which we would interpret as purchase prices incurred and respectively selling prices charged upon engaging in the related transactions, irrespective of whether trade date accounting or settlement date accounting is further applied), whilst the amounts referred to in Annex V as relevant for the numerator of the Trading KPI are the “gross carrying amounts”.

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

In our view, as also already hinted to by our answer to Q2, the most viable option is by far option (a). In a nutshell, this is because:

• as also outlined by the statistics annexed to the presented analysis, trading tends to be an insignificant business segment (<10%) for a large majority of EU obligated credit institutions, both as a contribution to total assets and as a contribution to annual net turnover;
• most of the trading (about 60%) undertaken by the EU obligated credit institutions involves financial instruments other than securities, mostly derivatives;
• out of the ensuing tiny amount of trading that would fall in the scope of the narrowed down Trading Book (option b) by reference to reporting credit institution’s total assets and turnover for any given year, one can expect that only a further tinier proportion would relate to trading engaged into as market maker. Moreover, paragraph 53 of the presented analysis hints that, instrument type wise, under the option (b) the scope of the Trading KPI might be further narrowed down to debt securities only;
• all in all, that would result in creating a complex reporting infrastructure in order to address a highly immaterial component of an already relatively immaterial business activity, with close to zero informative benefits for the users of the EU Taxonomy disclosures, given the expectation that, for any given reporting year, a very small number of credit institutions, if any, would have to actually report their Trading KPI, given the 10% de minimis by reference to institution’s net annual turnover;
• the pervasiveness of the correlation between securities trading as market maker and environmentally sustainable financing remains debatable.

Similarly to the case of the FCI KPI, we do not believe that turning the Trading Book KPI (Template 7) into a voluntary disclosure is meaningful either. That would potentially introduce randomness and inconsistency, both across reporting periods and across entities. Also, it would turn the recently introduced concept of 10% de minimis with respect to EU Taxonomy KPIs partly redundant. Moreover, it would change the meaning of the concept of “voluntary” as used so far in sustainability reporting matters, which has been defined by reference to being obligated or not to prepare a sustainability statement altogether, not by reference to choosing, as an obligated undertaking, what specific requirement to apply and what not.

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

Given the aspects outlined in answering Q6 and Q7, we believe that any benefits from keeping the requirement for disclosing the Trading Book KPI in its narrowed down form (option (b)) are highly insignificant, both from a preparer and from a user perspective.  In our opinion, the magnitude of the costs involved in creating the technical readiness for such a disclosure cannot be justified by the expected marginal benefits. In this respect, we would like to underline again that, unlike all other EU Taxonomy KPIs, the most granular datapoints falling in the scope of this KPI, by being purchases and sales throughout the reporting year, are not limited to those attributable to trading security asset deals that are necessarily outstanding at the balance-sheet date.  At the same time, the monetary amounts to be collected and further processed in calculating this KPI are also not those that reflect as trading (net) gains or losses in reporting period’s statement of profit or loss. Moreover, from this population of transactions, only those engaged into as market makers and concerning trading securities that are, we would assume, issued by entities outside the prudential scope of consolidation would need to be properly identified then filtered in. We estimate the costs to be invested in ensuring the necessary technical readiness as unjustified.

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

From the perspective of the Austrian banking and insurance sector, the proposal is primarily relevant where credit institutions act as users of Taxonomy KPIs published by investment firms, or where investment services are provided within credit institution-led groups. In this capacity, we generally agree with the analysis and its conclusion.

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

From this perspective, we agree, as a matter of principle, with limiting the KPI to the four proposed elements: portfolio management, investment advice, underwriting and/or placing of financial instruments on a firm commitment basis, and placing of financial instruments without a firm commitment basis.

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?

We consider it more appropriate for the KPI to reflect the value of assets under management or assets covered by the relevant investment services rather than monetary benefits generated, as this would improve comparability and reduce the volatility linked to revenue-based metrics.

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?

Yes, we agree with the analysis presented and to the conclusion. However, with respect to EBA’s advice as described in the paragraph 92.b, we would welcome a clarification of how the concepts of “unallocated proceeds” and “proceeds of financial instruments financing eligible capital expenditure” would apply in the context of grandfathering in connection with the EU Taxonomy assessment by a credit institution of its specific purpose loan assets. 

Let us take the example of a specific purpose loan asset that is assessed and reported as EU Taxonomy aligned, but the applicable technical screening criteria are then changed in a way that would disqualify that loan asset from being classified as EU Taxonomy aligned. Does the advice in paragraph 92.b intend to say that the institution is allowed to continue to classify and report that loan asset as EU Taxonomy aligned for up to further 7 years down the line, but such a permission would only apply to any amounts that the counterparty hasn’t yet used or if that loan is financing a capital investment of the counterparty? Or is the paragraph 92.b rather addressing institutions’ not yet invested (“allocated”) proceeds out of bonds issued for funding specific purpose investments and classified as “green” upon being issued by reference to technical screening criteria subsequently changed?

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

Yes, we do agree with the analysis presented and with the general idea that groups should disclose at consolidated level a single set of KPIs being those applicable to the type of main business activity of the parent undertaking, with additional disclosure, in a reduced form to be further developed, of the KPIs applicable to the type of activity of a given subsidiary, provided that (a) that subsidiary is material to the Group by reference to a “10% de minimis – like” criterion to be newly and explicitly introduced, (b) the main business activity of that subsidiary is different from the one of the parent undertaking and (c) that subsidiary is not “captive”, i.e. mostly serving group’s internal needs. On the other hand, the existing requirement for a weighted average KPI would be dropped, including due to the shortcoming of double-counting, e.g. in case of a group led by a credit institution and including insurance or non-financial subsidiaries that, according to the CRR consolidation rules, are accounted for at equity in the consolidated balance-sheet of the Group.

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, as also hinted to in answering Question 13, we believe that a single set of KPIs should be required at the related group level and that single KPI set should be the one applicable to the main business activity of the parent undertaking. Any additional KPIs would only be disclosed, in reduced layouts, in respect of non-captive material subsidiaries (10%+) with dissimilar main business activity.

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.

We believe that the consolidated KPI should reflect the consolidated assets in group’s CRR consolidated balance-sheet, which, in this particular case, would come down to not “looking through” into the assets of a subsidiary consolidated using the “at-equity” as per the applicable CRR consolidation rules but, instead, classify for EU Taxonomy purposes a financial asset taking the form of an equity instrument. At the same time, if such a subsidiary is material (10%+), non-captive and dissimilar in terms of main business activity, transparency of sustainability information would be addressed by additional disclosure of the applicable KPI set, in a reduced form, still to be designed. On the other hand, we would mention the slight paradox arising from that group applying its own alignment KPI (as of the preceding year-end) as a weighting factor for calculating the EU taxonomy-aligned component of the related equity asset exposure, as subsidiary level KPIs would be unavailable, unless they would start being additionally required based on the existing proposal if such an insurance or non-financial subsidiary is material (10+) and non-captive.

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?

Consistently with the previously provided answers to Q13 and Q14, we believe that the KPIs applicable to credit institutions should be required at Group level for such cases, with further KPIs applicable to the related dissimilar main business activities (non-financial, investment, asset management, insurance), to be additionally disclosed in a simplified form, if they stem from material (10%+) non-captive subsidiaries or sub-groups.

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.

Yes, we do agree with the analysis presented and with the conclusion of refraining from explicitly incorporating the OPEX KPIs disclosed by a credit institution’s counterparties into the institution’s calculation of its own KPIs, even when such an approach would be applicable on a voluntary basis only. While fully agreeing that adding an “OPEX view” (in addition to the “Turnover” and “CAPEX” views) to a credit institution’s KPIs would be an unjustified additional burden adding unnecessary complexity, we also believe that the idea of blending counterparties’ OPEX KPIs into the calculation of a credit institution’s KPIs in CAPEX view is without significant merit and unpractical, having also in mind that the envisaged weighted-average calculation of the “CAPEX-OPEX” average KPIs to be further applied would mean an additional layer of complexity entailing internal calculations factoring not only counterparty’s CAPEX and OPEX KPIs but also the related amounts to be used as weighs, let alone the need of additionally collecting the related OPEX KPIs of the counterparty in the first place. The possible positive effect on institution’s KPIs in CAPEX view (that would become CAPEX-OPEX view), as well as the possibility that such an approach might increase the appetite of credit institutions to finance sustainable operating expenditure of their non-financial corporate clients, along the general idea that such an approach would improve the relevance and usability of the OPEX KPIs disclosed by non-financial undertakings does not constitute, in our view, sufficient arguments for such an approach, even when credit institutions would apply it only voluntarily (which, as the analysis rightfully points out, would potentially reduce comparability of credit institutions’ KPIs in CAPEX view). 

As a side note, we would like to draw attention to the typographical error in Consultation Paper’s executive summary, page 9, sub-title “Considering OpEx for the computation of the KPIs of financial institutions”, the introductory sentence of which reads “The Discussion Paper examines the potential voluntary use by non-financial undertakings of OpEx information disclosed by non-financial undertakings.”

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.

We do not believe that such a merging is advisable. Instead, as also hinted by our answers to Q13-15 above, we believe that, as soon as a group headed by a credit institution includes non-captive asset management subsidiaries that generate asset management fees of at least 10% of group’s consolidated annual net turnover, disclosure of the KPI for asset managers as per Annexes III and IV might be additionally required in respect of those subsidiaries, whilst, in order to avoid double-reporting, the scope of the AuM KPI as per Annexes V and VI would be limited to any asset management activities performed elsewhere in the Group, e.g. by specialized departments of group’s credit institutions, provided that those activities would generate asset management fees of at least 10% of group’s consolidated annual turnover. 

A plain merging of credit institution’s AuM KPI (Annexes V and VI) and the KPI for asset managers (Annex III and IV) would imply a full or quasi-full overlap of the related disclosures, which, in our view, is not the case, at least for the following two main reasons:

• The KPI for asset managers (Annexes III and IV) addresses asset management activities performed by asset managers organized as legal entities (“undertakings”), whilst the AuM KPI (Annexes V and VI) does not feature this limitation, i.e. it can well address asset management activities performed by specialized departments of group’s credit institutions;

The scope / granularity of information expected in disclosing the KPI for asset managers (Annexes III and IV) is significantly wider / deeper than the ones expected in disclosing the AuM KPI (Annex V and VI). Thus, the KPI for asset managers (Annexes III and IV) cover all categories of assets under management, whilst the AuM KPI (Annexes V and VI) are limited to debt securities and equity instruments. Also, the KPI for asset managers (Annexes III and IV) feature many additional disclosures (such as the ones in the rows 4, 5, 8, 9, 10, 11, 14, 15, 27, 28, 29, 30 of the Template for the KPI of Asset Managers in Annex IV) that are actually not required by the AuM KPI (Annexes V and VI). Therefore, a merging as proposed would either significantly eliminate information currently required from asset managers or significantly increase complexity of the AUM related disclosures in Templates 1 and 5 as per Annexes V and VI.

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?

Given our answer to Q17 above, we deem answering this question as not applicable.

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?

• The Do No Significant Harm criteria should be revised. A revision should result in 1. Simplification – fewer or less detailed criteria; 2. Development of standardized/clear processes based on which proof of compliance with these criteria can be obtained; and 3. Anchoring directly in the legal framework for the construction industry to collect.  According to the Environment Agency Austria (Link: DNSH Criteria - Executive Summary), common application challenges that companies face include, in particular, impaired readability due to extensive cross-referencing to other EU legislative acts, uncertainties in interpreting qualitative DNSH criteria, difficulties in communicating complex DNSH criteria, and high external costs for expert assessments and consulting. Meanwhile, banks encounter obstacles regarding missing data—especially for non-reporting customers such as private clients, SMEs, and the public sector—as well as the high level of effort required for data collection and evaluation.
• Minimum Social Safeguards (MSS) criteria should be considered fulfilled for EU companies and for all activities carried out within the EU, provided there are no indications that EU law has been violated. Evidence of compliance with the MSS (the current procedure that must always be adhered to for taxonomy alignment) should only be required when the company operates outside the EU. Since many European SMEs that operate within the EU legal framework are already subject to comprehensive EU regulations. Therefore, requiring the same evidence for MSS compliance for their activities inside the EU continues to create unnecessary administrative burdens without adding significant value. This approach results in banks using European SMEs for KPIs e.g. GAR (Green Asset Ratio) calculations, while still ensuring MSS Standards are met for activities outside the EU where regulatory oversight may vary.
• In order to avoid an insufficient implementation time, adopted amendments shall be published in the Official Journal without delay - e.g., if a legal act is intended to apply to financial year 2027, it must be published in the Official Journal of the European Union during that same year—ideally by the summer at the very latest.
• In applying the 10% de minimis test as per Article 4, point 1f, what is the reference reporting period that should be considered? In our view, it is reasonable that the most recent financial year covered by financial statements already published at the time of the assessment, which normally means the financial year preceding the current financial year.
• Our understanding of Article 7, paragraph 3, third sub-paragraph, point (b) is that the related option by the reporting credit institution applies at deal-level granularity. Let us assume that the reporting credit institution has a non-obligated undertaking as counterparty for both use of proceeds known financing deal A and use of proceeds known financing deal B. In this case, the institution can, for instance, decide to assign into the GAR relevant row 19 of the simplified Template 1 at the reporting date T the deal A only, while the deal B is assigned in the applicable GAR excluded row. Moreover, at the subsequent reporting date T+1, the institution can decide to take the deal B into the GAR relevant row 19 as well.
• Article 8 paragraph 8 states: “The information referred to in paragraphs 6 and 7 [nn: the proportions of eligible and respectively aligned financings of the nuclear and respectively gas and fossil fuels sectors] shall be presented in tabular form by using the templates set out in Annexes II, IV, VI, VIII, and X to this Regulation”. As far as credit institutions are concerned (Annex VI), we could not identify where precisely in the featured templates the required proportions should be presented and therefore a clarification in this respect would be welcome (or the templates should be amended accordingly).
• With regards to the required views for Template 2 “GAR sector information”, we could not identify any explicit requirement for the flow views. On the other hand, we have noticed that, unlike the original Template 2 layout, the simplified one features the word “Period” in the header. Moreover, we understand that the proportions required by the Article 8 paragraphs 6 and 7 should be disclosed in a flow view as well, with the related numerators purportedly sourced in Template 2, rows 11 and respectively 12, columns b and respectively c. Against this mixed background we would welcome an explicit clarification that flow views are not expected for Template 2.
• With regards to the scope of Template 2, having acknowledged the significant scope widening from qualifying exposures to NFRD/CSRD obligated non-financial undertakings (original template 2) to all banking book exposures covered by Taxonomy (footnote 1 to the simplified Template 2), we would however like to clarify if the widened scope fully includes exposures to Households and respectively Local Governments as well, having in mind, on the other hand, that (a) a majority, but not all of the exposures to Households are inherently not assigned to any NACE code from the NACE 2.1 catalogue and (b) exposures to Households and respectively Local Governments other than those where the purpose and/or the collateral type  qualifies them for being GAR covered are not included in the GAR assets as presented in Template 1. In this last respect, we would additionally welcome a clarification that such exposures (e.g. consumer loans to Households or general-purpose financing of Local Governments) need to be allocated into the GAR excluded row 25 “Undertakings and entities not subject to CSRD” of the simplified Template 1, in absence of a better option across the GAR excluded rows.

With regards to the scope of Template 2, rows 11 and 12, we would welcome a clarification on whether general purpose exposures to obligated financial undertakings, as also captured accordingly within the GAR assets presented in Template 1, should be considered in both row 11 and row 12, irrespective of whether the related counterparties reported or not any of the proportions required by Article 8 paragraph 6 and 7 that could be used for weighing further the related exposures, for the purpose of the columns b and c of each of the two related rows. Also, we would welcome a clarification on whether the amounts to be reported in the rows 11 and 12 column a have any further usefulness for the purpose of calculating the proportions required by Article 8 paragraph 6 and 7 (in our current understanding, they don’t).

Name of the organization