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Regulation (EU) No 575/2013 on prudential requirements for credit institutions as amended (Capital Requirements Regulation)

legislation type Executive
Eu Regulation
Passed in 2022
According to article 1, the Capital Requirements Regulation lays down uniform rules concerning general prudential requirements that institutions, financial holding companies and mixed financial holding companies supervised under Directive 2013/36/EU shall comply with in relation to the following items:
(a) own funds requirements relating to entirely quantifiable, uniform and standardised elements of credit risk, market risk, operational risk, settlement risk and leverage;
(b) requirements limiting large exposures;
(c) liquidity requirements relating to entirely quantifiable, uniform and standardised elements of liquidity risk;
(d) reporting requirements related to points (a), (b) and (c);
(e) public disclosure requirements.

Under the version in force in 2022, article 501a on "adjustment to own funds requirements for credit risk for exposures to entities that operate or finance physical structures or facilities, systems and networks that provide or support essential public services", specifies in section 1.o) that own funds requirements for credit risk calculated in accordance with Title II of Part III shall be multiplied by a factor of 0,75, provided that the obligor has carried out an assessment whether the assets being financed contribute to the following environmental objectives:
(i) climate change mitigation;
(ii) climate change adaptation;
(iii) sustainable use and protection of water and marine resources;
(iv) transition to a circular economy, waste prevention and recycling;
(v) pollution prevention and control;
(vi) protection of healthy ecosystems.

Article 434a mandates the European Banking Authority (EBA) to develop draft implementing technical standards (ITS) specifying uniform disclosure formats, and associated instructions in accordance with which the disclosures required under Titles II and III. Article 449a on disclosure of environmental, social and governance risks (ESG risks) states that from 28 June 2022, large institutions which have issued securities that are admitted to trading on a regulated market of any Member State, as defined in point (21) of Article 4(1) of Directive 2014/65/EU, shall disclose information on ESG risks, including physical risks and transition risks, as defined in the report referred to in Article 98(8) of Directive 2013/36/EU. In compliance with these obligations, the EBA published in January 2022 final draft implementing technical standards on Pillar 3 disclosures on Environmental, Social and Governance (ESG) risks. According to this final draft, the ITS include:
(i)  tables for qualitative disclosures on environmental, social and governance risks;
(ii)  templates with quantitative disclosures on climate change transition risk;
(iii)  a template with quantitative disclosures on climate change physical risk;
(iv)  templates with quantitative information and key performance indicators (KPIs) on climate change mitigating measures, including the Green Asset Ratio (GAR) on Taxonomy-aligned activities according to Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment (Taxonomy Regulation) 1 , extended information on Taxonomy alignment of exposures in the banking book and other mitigating actions.

Documents

from the Grantham Research Institute
from the Grantham Research Institute
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