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  1. Home
  2. Single Rulebook Q&A
  3. 2023_6938 Misalignment between table 2 Annex XXXIX and Annex XL
Question ID
2023_6938
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Transparency and Pillar 3
Article
449a; 435
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Regulation (EU) 2022/2453 - ITS on ESG disclosures
Article/Paragraph
18bis; ANNEX XXXIX and ANNEX XL
Type of submitter
Credit institution
Subject matter
Misalignment between table 2 Annex XXXIX and Annex XL
Question

The Pillar 3 DA foresees the publication of three qualitative sections which require the application, in particular, of Regulation (EU) no. 2022/2453. From the examination of this A discrepancy has been observed between the delegated regulation and its annexes I (which includes the text of the original annex XXXIX) and II (which contains the text of the original annex XL) regarding what is reported  in table 2 of the Annex XXXIX and what is described in the instructions for table 2 of Annex XL about letter d) relating to Governance on social risk.

 

In particular:

- In Annex XXXIX table 2 - Qualitative information on social risk in line d) for the Governance aspects, it is specified what information must be published: the "Responsibilities of the management body for setting the risk framework, supervising and managing the implementation of the objectives, strategy and policies in the context of social risk management covering counterparties' approaches to: (i) Activities towards the community and society, (ii) Employee relationships and labor standards, (iii) Customer protection and product responsibility, (iv) Human rights". The focus of the information appears to be on the approaches that the Bank's counterparties (customers and suppliers) take towards the community and society, its relationships with employees and compliance with labor standards, customer protection and product liability and human rights, posing an indirect risk for the financial institution.

- In Annex XL the instructions for compiling the tables and models referred to in Annex XXXIX provide that "in accordance with Article 449a of Regulation (EU) No 575/2013, in conjunction with Article 435(1), point ( b), and Article 435(2), points (a), (b) and (c), of that Regulation, institutions shall describe how their management body is involved in the supervision and management of social risks. That information shall cover the rationale of the approach taken by the management body and take into account a number of social factors. Those factors include the institution’s engagement towards the community and society, its relationships with employees and compliance with labor standards, customer protection and product responsibility, and human rights.” In this case there would be a direct risk for the Bank. The art. 18 bis point 1 a) of Regulation (EU) 2022/2453 also establishes that, in relation to information on environmental, social and governance risks, entities (intended as financial institutions) publish "qualitative information on environmental, social and governance risks using tables 1, 2 and 3 set out in Annex XXXIX to this Regulation and following the instructions set out in Annex XL to this Regulation”.

Should table 2 Annex XXXIX be filled reporting direct or indirect risks?

 

 


 

Background on the question

The approach adopted was that of the representation of an indirect risk (referring to what is reported in annex XXXIX): therefore we concentrated on the main request of the table without referring to the specific “Instructions for disclosure of ESG risks” (provided in the annex XL), as the request for the template already seemed sufficiently explanatory by making a specific reference to the topic of the counterparties. Furthermore, the topic of direct risks, therefore with reference to management by the Entity, seems already required in other specific points of the legislation. 

Submission date
21/12/2023
Rejected publishing date
27/03/2024
Rationale for rejection

This question has been rejected because the legal basis it refers to is in the process of being revised and the issue it raises will be reconsidered in regard to the new regulatory framework.

The Single Rule Book Q&A tool has been established to provide explanations and non-binding interpretations on questions relating to the practical application or implementation of the provisions of legislative acts referred to in Article 1(2) of the EBA’s founding Regulation, as well as associated delegated and implementing acts, and guidelines and recommendations, adopted under these legislative acts.

For further information on the purpose of this tool and on how to submit questions, please see “Additional background and guidance for asking questions”.

Status
Rejected question

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