Question ID:
2022_6537
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Topic:
Transparency and Pillar 3
Article:
449a
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Not applicable
Article/Paragraph:
Not applicable
Disclose name of institution / entity:
Yes
Name of institution / submitter:
Dutch Banking Association
Country of incorporation / residence:
The Netherlands
Type of submitter:
Industry association
Subject Matter:
Template 5 - Definition of time horizons
Question:

With regards to the Final draft implementing technical standards (ITS) on prudential disclosures on ESG risks in accordance with Article 449a CRR, specifically regarding Template 5 of related Annex XXXIX, could you specify 'time horizon'?

Background on the question:

Which time horizon should be used to indicate the threshold of physical risk (long, medium, short term) and what definitions for these terms are used)?

Date of submission:
28/07/2022
Published as Final Q&A:
25/11/2022
Final Answer:

The EBA recognises that a number of different methods to model physical risk are currently used in the industry, as well as different applications within each method. Similarly, the time horizons may vary. Because of this inherent variability, the usage of time horizons needs to be applicable to the reporters’ own business model as well specificities in terms of exposure to physical risks.

However, to enhance the quality of the data disclosure, the EBA suggests to refer to the several reports on ESG risk modelling that several authorities have already issued to the market (among which EBA/REP/2021/18). Moreover, the timeframe for long-term environmental risk should normally exceed the 10 years mark.

With regards to specific aspects of ESG risk modelling, the EBA encourages reporters to develop or use the methodology that best takes into account the assumptions of data used, as well as the current market practices and the specificities of the financial product and/or local normative framework. Because of these reasons, reporters are encouraged to add additional qualitative disclosure on the methods and assumptions used in order to facilitate the comprehension of the data disclosed.

Status:
Final Q&A
Answer prepared by:
Answer prepared by the EBA.
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