EBF CONSULTATION RESPONSE
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EBF response to the EBA Discussion Paper on the role of environmental risks in the prudential framework

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BRUSSELS, 1^st August 2022  – The European Banking Federation has responded to the discussion paper of the European Banking Authority on the role of environmental risk in the prudential framework. The key messages are as follows:

• We support the approach of the European Banking Authority to follow a risk-based and risk sensitive approach. Banks should not be used as the primary enforcers of EU climate policy, but can channel financing to sectors and business in line with public policy objectives. Those public policy objectives need to be defined by the political institutions who are in a position to define detailed transition paths. Therefore, the prudential treatment should be based on the actual financial risk posed by an exposure and not on political considerations
• It is important to note that banks are already integrating environmental risks in their risk management frameworks and are collecting data from customers to that end
• We support the dialogue between supervisors and banks to discuss how banks can manage and, if need be, mitigate climate risks, taking into account each banks specific situation, rather than seeking a solution through the pillar 1 framework
• We also encourage that regulators and supervisors work together with banks to develop the methodologies that can include the forward-looking aspect of climate risk and long-term horizons in the risk management framework. In this respect it is important to highlight that the prudential framework already provides for means to understand where banks stand in terms of climate risk, such as scenario analysis

For more information please contact:

Lukas Bornemann
Policy Adviser – Prudential Policy and Supervision, l.bornemann@ebf.eu

Denisa Avermaete
Senior Policy Adviser – Sustainable Finance, d.avermaete@ebf.eu

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About the EBF:
The European Banking Federation is the voice of the European banking sector, bringing together 32 national banking associations in Europe that together represent a significant majority of all banking assets in Europe, with 3,500 banks – large and small, wholesale and retail, local and international – while employing approximately two million people. EBF members represent banks that make available loans to the European economy in excess of €20 trillion and that reliably handle more than 400 million payment transactions per day. Launched in 1960, the EBF is committed to a single market for financial services in the European Union and to supporting policies that foster economic growth.