CONSULTATION RESPONSE
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ESAs Joint Consultation paper on Taxonomy-related sustainability disclosures (SFDR RTS): EBF response
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BRUSSELS, 14 March 2021 – The European Banking Federation has responded to the ESAs Joint Consultation paper on Taxonomy-related sustainability disclosures (SFDR RTS).
Key message:
- Lack of comparable, reliable and standardized data (including from external data providers) and information necessary both for a complete and correct due diligence and classification of the financial products’ sustainability degree remain a critical issue. Companies will only begin to report their taxonomy alignment in 2022.
- It is not practical for the two SFDR-RTSs to come into force at different times as templates implemented from the first RTS would have to be changed when the second RTS becomes applicable. Since the templates are mandatory, they cannot be implemented based on the draft of the second RTS, as this would risk violating the law if the second RTS were delayed. We support ESAs suggestion of an implementation period of at least six months in terms of the mandatory use of the templates. European Commission should consider safeguards in case the RTSs are not finalized early enough to allow sufficient implementation time. Assuming that the final RTS will not be published until autumn 2021, at the earliest, it is expected that full compliance with the first obligations in January 2022 will prove unrealistic. We would also favor a one-year transition phase where the best effort approach is allowed. Such an experimental type of enforcement of one year will benefit both FMPs and their supervisors. It will allow, but support FMPs to try their best efforts to implement the regulation on time, without fear of regulatory reprimands.
- While including assets that cannot be assessed for taxonomy, will not give a thoroughly accurate view of the composition of the portfolio with regards to the non-taxonomy aligned share of the portfolio (which could be made of both non-assessable and non-aligned activities, we do consider this to be appropriate as long as the meaning of the % is clearly stated and understood by investors. To provide investors with clarity, it should be made possible for financial market participants to disclose an additional KPI, which excludes sovereign bonds and other assets that cannot yet be assessed for taxonomy-alignment to ensure that funds are not unduly penalized for investing e.g. in sovereign bonds. The scope of investments taken into account in this second voluntary indicator will expand progressively as taxonomy develops. Requiring government reporting, thus the availability of information on sovereign bonds would also improve reporting. There should also be a blank explanation field, where the FMPs can describe the product’s investments and the investments’ relation to the EU taxonomy in more detail.
- To provide investors with clarity, it is suggested that financial market participants should clearly state in a check box solution whether the financial product:
- invests in activities that contribute to an environmental objective [article 9 products, taxonomy aligned or non-taxonomy aligned];
- invests in environmentally sustainable investments [=taxonomy aligned];
- promotes environmental characteristics [Article 8 products];
- invests in socially sustainable investments Art. 9];
- promotes social characteristics [Art. 8];
- invests in both environmentally and socially sustainable investments (Article 9, either taxonomy aligned or other);
- promotes environmental and social characteristics (Article 8).
Find the EBF response to this consultation by clicking the ‘full document’ button below:
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FOR MORE INFORMATION:
Sustainable Finance page on the EBF website: CLICK HERE
Denisa Avarmaete, Senior Policy Adviser, Sustainable Finance, EBF
d.avarmaete@ebf.eu
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ABOUT THE EUROPEAN BANKING FEDERATION:
The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.
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]]>Publication date: 8 May 2019
Executive summary
In April 2016, the Basel Committee on Banking Supervision (BCBS) published the Standards on Interest Rate Risk in the Banking Book (IRRBB).
The forthcoming Capital Requirements Directive (CRD 5) and Capital Requirements Regulation (CRR 2) implement the BCBS Standards in the regulatory framework of the European Union. The final text of the so-called Risk Reduction Measures (RRM) package including CRD 5 / CRR 2 was adopted by the European Parliament in mid-April 2019 and will need to be applied in two years.
CRD 5 mandates the European Banking Authority (EBA) to complement the directive by drafting Regulatory Technical Standards (RTS) to submit to the European Commission or by issuing guidelines within one year after the publication. In this context, the European banking industry, through the European Banking Federation (EBF), decided to articulate this memorandum which specifies the ”European Banking Industry Common Understanding of CSRBB as defined by EBA Guidelines”. The EBF uses this paper to provide its views on the EBA Guidelines’ definition of CSRBB, the monitoring process and the assessment of the framework.
EBF contact:
Lukas Bornemann, Prudential Policy and Supervision, l.bornemann@ebf.eu
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]]>EBF adviser: Saif Chaibi
Publication date: 15 March 2018
Key points:
- Well established securitisations considered as high–quality under current market practices must be preserved and considered as simple, transparent and standardised under the new securitisation framework. EBA itself recognises in its paper that the aim of the new proposal on homogeneity is not to alter current market practices.
- A definition of homogeneity based on asset classification already exists for ABS to be eligible as collaterals to the ECB (ECB Guideline EU 2015/510). Securitisations that comply with this definition are currently considered as high quality, homogeneous and simple operations of which the underlying exposures can be easily assessed by the investors.
- The EBF would recommend ensuring consistency between the EBA proposal and the ECB Guidelines, therefore removing the requirement to consider a list of risk factors for each asset category in order to avoid the creation of a complex global framework where some securitisations would be considered as homogeneous for the ECB but would not be granted with the STS stamp.
- In case that the risk factors are finally maintained:
- It is worth noting that a strict interpretation of the EBA proposal would not recognise most of the well-established securitisations as homogenous. If all the risk factors defined as “to be considered” by EBA for any asset category end up being binding and must be applied to determine whether the underlying assets of a securitisation can be considered as homogeneous, most of the existing securitisations would be disqualified even if they are currently deemed as high-quality according to the ECB definition.
- The EBF recommends further clarifying that all the risk factors listed as to be considered should not automatically be applied.
- It is also important to specify that the supervisor should focus his ex-post assessment of banks’ application of the homogeneity criteria on the reasons why banks consider a pool of assets as homogeneous. Banks should not be automatically required to justify why they did not consider some of the risk factors which would make all these risk factors binding.
- The EBA RTS should take into consideration that some securitisations are backed by a pool of securitised exposures constituted by homogenous sub-portfolios that belong to the same asset category but that would not fulfil the homogeneous requirement if the entire pool is considered. This kind of securitisations should not be disqualified.
- Regarding the proposed classification by asset categories, it is worth noting that it is a common practice for banks to issue securitisations that are backed by a mixed pool of assets including for example both loans to natural persons and loans to SMEs. The EBF would recommend the introduction of a materiality threshold similar to the one proposed for the consideration of risk factors, that would allow a certain degree of diversification in terms of asset category.
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]]>EBF advisor: Roger Kaiser
Publication date: 11 July 2017
The European Banking Federation welcomes the opportunity to comment on the draft Joint Regulatory Technical Standards on the measure credit institutions and financial institutions shall take to mitigate the risk of money laundering and terrorist financing where a third country’s law does not permit the application of group-wide policies and procedures.
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]]>EBF advisor: Roger Kaiser
Publication date: 2 August 2017
In its response, the EBF calls for the US to provide pragmatic solutions and guidelines for Foreign Financial Institutions under FATCA.
The following points are highlighted:
– If no US TIN is communicated and reasons for its non-availability are not communicated by the customer, the Financial Institution should be allowed to report the date of birth of the customer if he is a natural person and a commercial register number or VAT identification number if it is an entity.
– Like under the Common Reporting Standard, Financial Institutions should make reasonable efforts to receive the US TIN from pre-existing customers within 2 years after the accounts of the customer have been identified as reportable.
– Reasonable efforts consist for instance of asking the relevant questions to the customer in person or per mail, per telephone, e-mail or other tools such as SMS messaging.
– If the US TIN has not been obtained, the customer should be contacted once per year.
– If it has made reasonable efforts, the Financial Institution should keep its FATCA-compliant status and should not be subject to any penalty even if US TINs are missing. The scope of the default reporting should be limited only to entities for which US indicia have been identified in relation to the entity or one or more of its Controlling Persons based on AML/KYC or other information.
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]]>EBF asks Commission to support ban on screen scraping
Privacy of client data, cybersecurity and innovation at risk if EBA standards are dismissed and screen scraping continues
BRUSSELS, 16 May 2017 – The European Banking Federation has asked the European Commission not to dismiss a key recommendation by the European Banking Authority (EBA) on future electronic payments in the European Union. The EBF fears that the privacy of client data, cybersecurity and innovation are put at risk if the Commission does not fully endorse the EBA standards.
PSD2 introduces a general security upgrade for third-party access to a client’s data, bringing an end to practices known as ‘screen-scraping’ [VIDEO]. Such services, seen as a first-generation direct access technology, let third parties access bank accounts on a client’s behalf by impersonating while using their access credentials. PSD2 calls for the creation of a technology-neutral level-playing field for banks and fintechs, new and old.
The proposal requires banks to opt for either creating a ‘dedicated interface’ that lets third parties access bank accounts on behalf of clients, or to upgrade their client interface. These solutions would replace the old practice of screen-scraping. They ensure the continuation of direct access services in the EU in a secure way by empowering clients to decide for themselves which data can be accessed by third parties. The EBF sees the EBA standards as a common solution that ensures security and as a significant catalyst for innovation into the future in the European payments market, fully compliant with the EU’s General Data Protection Regulation (GDPR).
The European Commission appears to be willing to go against the EBA advice and may let screen-scraping continue by requiring banks to accept screen-scraping as an additional mandatory direct access method, forcing banks to maintain at least two interfaces. Banks are deeply concerned over this development and fear that such a choice would harm the development of electronic payment services. It would come at the expense of innovation in payment services and would make it more difficult to protect the privacy of account holders.
Says Wim Mijs, Chief Executive Officer of the EBF:
“The development of PSD2 can be compared to designing a new plane. You develop highly secure, innovative and sophisticated systems to make it fly. But what happens now, in the final development stages, is that the designers are required to put a heavy diesel generator on board. This plane then becomes too heavy to fly. If banks are forced to accept screen–scraping then PSD2 will never fly the way it was intended.”
Both banks and new entrants in financial services technology are actively engaged in an industry-wide effort to develop common processes and standards. The forum for this cooperation is the Working Group on Payment Initiation Services of the Euro Retail Payments Board, created by the European Central Bank.
Media Contact:
Raymond Frenken, Head of Communications, +32 496 52 59 47, r.frenken@ebf.eu
About the EBF:
The European Banking Federation is the voice of the European banking sector, uniting 32 national banking associations in Europe that together represent some 4,500 banks – large and small, wholesale and retail, local and international – employing about 2.1 million people. EBF members represent banks that make available loans to the European economy in excess of €20 trillion and that securely handle more than 300 million payment transactions per day. Launched in 1960, the EBF is committed to creating a single market for financial services in the European Union and to supporting policies that foster economic growth.
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]]>Publication date: 25 July 2016
General Comments:
- We note that the disclosures which are being proposed are intended only within the framework of the disclosure requirements in Part Eight of the CRR and that, as a consequence, they are not meant to be used as the basis for compliance with IFRS Disclosure requirements (see pages 13 and 14 of the CP).
- We conclude from this that banks are only required to disclose information on asset encumbrance in their Pillar 3 report and not in their financial statement. It would be useful for the Explanatory Memorandum which will accompany the forthcoming RTS to confirm this.
- Although the EBA consultation paper is based on the templates A,B, C, and D of the Guidelines already issued in June 2014, EBA requires the disclosure of some further information, both qualitative and quantitative (e.g. in relation to assets and collaterals in EHQLA and HQLA), which would entail organizational and operational implementation issues to upgrade current IT systems.
- We note that the consultation paper does not provide any guidance to competent authorities about the timeframe which they are expected to impose on institutions for the revised templates to be implemented.We believe that it would be appropriate for the final version of the Guidelines to include a recommendation specifying that competent authorities are expected to provide institutions with sufficient time to implement them. Should the EBA decide to retain the EHQLA and HQLA metric as the asset quality indicator, we envisage a minimum period of 2 years due to the reasons given in our answer to Question 4, which also takes into consideration the numerous regulatory and IFRS projects that banks are currently implementing.
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Publication date: 03 January 2017
Responding to this paper:
The European Securities and Markets Authority (ESMA) invites responses to the specific questions listed in the ESMA Discussion Paper on the trading obligation for derivatives under MiFIR, published on the ESMA website.
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