EBA issued \u2018no-action\u2019 letter while sustainability disclosures are reviewed in boon to smaller banks<\/p>\n
EU banks will not have to meet certain climate and other sustainability disclosure rules after the European Banking Authority told national regulators not to enforce them.\u00a0<\/p>\n
The EBA, in a \u201cno-action\u201d letter issued on August 6, told national authorities not to prioritise enforcing new disclosure rules until ongoing sustainability reporting reviews have concluded.<\/p>\n
The European Commission and EBA are now reviewing how to streamline environmental, social and governance disclosure requirements, with both expected to have \u201ca direct impact on the structure and content of ESG risk-related disclosures\u201d.<\/p>\n
This no-action letter means EU banks that have become subject to ESG reporting requirements this year will not have to meet their first deadline of December 31 2025.<\/p>\n
Large institutions that trade securities on an EU market have been subject to these requirements since the beginning of 2024, under Article 449a of the Capital Requirements Regulations<\/a>.<\/p>\n The 2024 changes to the CRR extended the scope of annual ESG risk-related disclosures to \u201call institutions\u201d for 2025, in line with Basel III<\/a> reforms.<\/p>\n These disclosures are intended to give users \u201csufficiently comprehensive and comparable information\u201d to assess the risk profile of institutions.<\/p>\n However, enforcing these reporting requirements while potential changes are still being reviewed would require smaller banks to comply with disclosure obligations that may yet change considerably.<\/p>\n The EBA stated that this would place a \u201cdisproportionate compliance burden\u201d on smaller institutions.<\/p>\n Larger banks will also benefit from legal certainty while conflicting disclosure requirements from different EU legislative frameworks remain in place.<\/p>\n The no-action letter, said the EBA, was introduced to \u201caddress legal and operational uncertainties linked to the evolving ESG disclosure framework\u201d.<\/p>\n The European Commission announced its omnibus I initiative<\/a> in February, with proposals to simplify sustainability reporting and reduce the burden of compliance.<\/p>\n The omnibus initiative contains possible changes to various regulations, including the Corporate Sustainability Reporting Directive and the Carbon Border Adjustment Mechanism, and aims to deliver more than \u20ac6bn in administrative relief.<\/p>\n