EBA Trims ESG Reporting Burden Even as Disclosure Rules Expand

Key Takeaways

• Reporting Requirements Reduced: Large institutions will disclose 37% fewer ESG-related data points under the revised Pillar 3 framework, while other institutions will see a 17% reduction and small and non-complex institutions will disclose 84% fewer data points than large banks.
• ESG Disclosures Extended Across the Banking Sector: The revised standards expand ESG disclosure requirements beyond large listed institutions to include large non-listed institutions, large subsidiaries, other institutions, and small and non-complex institutions under a proportional framework.
• New Transparency Requirements Added: The standards implement new CRR3 disclosure obligations covering equity exposures and aggregate exposures to shadow banking entities, expanding visibility into areas of growing supervisory interest.
• Alignment With Sustainability Reporting Frameworks: The EBA aligned the revised disclosures with the European Sustainability Reporting Standards (ESRS) and its proposed ESG supervisory reporting framework to reduce duplication and improve consistency across reporting regimes.
• Implementation Begins This Year: The standards will now move to the European Commission for adoption and are expected to apply from 31 December 2026, with small and non-complex institutions receiving an additional year before first reporting.

Deep Dive

The EBA published final draft technical standards revising the European banking sector's Pillar 3 disclosure requirements on environmental, social and governance risks. The package also introduces new disclosure requirements covering equity exposures and aggregate exposures to shadow banking entities, completing a major portion of the implementation work required under the Capital Requirements Regulation 3 (CRR3).

Large institutions will report 37% fewer ESG-related data points than they do today. Other institutions will see a 17% reduction. Small and non-complex institutions will disclose 84% fewer data points than large banks under the new framework. For a regulatory system that has often been accused of layering new reporting obligations on top of old ones, those numbers stand out.

The EBA's announcement is part of a focus across Brussels to simplify reporting requirements that have accumulated over the past several years. Policymakers are not abandoning sustainability reporting. They are increasingly asking whether the amount of information being collected is proportionate to the value it provides. The revised framework extends ESG disclosure requirements beyond large listed banks. Large non-listed institutions, large subsidiaries, other institutions, and small and non-complex institutions will now fall within scope, as required by CRR3.

Ordinarily, expanding the population of firms required to report would mean more disclosures, more templates, and more complexity. The EBA has chosen a different approach. Instead, institutions will be subject to disclosure requirements calibrated to their size and complexity. Smaller institutions will focus on a limited set of core ESG risk information, including physical and transition risks and exposures to fossil-fuel-related sectors. Larger institutions will continue to provide more detailed disclosures.

The result is a framework that covers more institutions while requiring significantly less information overall. That balancing act appears deliberate. The EBA repeatedly references proportionality, simplification, and efficiency throughout both the final standards and the accompanying report. The initiative forms part of the authority's broader "Simplifying to strengthen" program, launched following its review of the efficiency of the EU regulatory and supervisory framework.

There is another theme running through the package, as well. Much of the work appears aimed at reducing duplication between reporting regimes that have developed on parallel tracks. The EBA said the revised standards have been aligned with the European Sustainability Reporting Standards (ESRS) used under the Corporate Sustainability Reporting Directive (CSRD). The goal is straightforward: information disclosed under Pillar 3 should be usable within sustainability reports rather than forcing institutions to recreate the same information in different formats for different audiences.

That may sound like a technical adjustment. For reporting teams inside large financial institutions, it is anything but. Banks have spent the past several years building separate reporting processes to satisfy prudential regulators, sustainability reporting requirements, investor expectations, and supervisory data requests. Any effort to create overlap between those frameworks can translate directly into lower reporting costs and fewer manual processes.

The EBA has also aligned the disclosure framework with its proposed ESG supervisory reporting regime, which remains under consultation. The authority is encouraging stakeholders to review both frameworks together, reflecting how closely the two systems are intended to operate.

New Disclosure Requirements and a More Centralized Reporting Model

The ESG revisions are only part of the package. The standards also implement two disclosure requirements introduced by CRR3 that have received far less attention than climate reporting. Banks will now be required to disclose information relating to equity exposures under Article 438(e) of CRR3 and aggregate exposures to shadow banking entities under Article 449b.

The shadow banking disclosures are particularly notable because regulators globally have become increasingly focused on risks building outside the traditional banking system. As private credit markets continue to expand and non-bank financial institutions play a larger role in financing activity, supervisors have been looking for better visibility into those exposures.

The EBA has applied the same proportionality principles here that it used for ESG disclosures, seeking to avoid creating reporting requirements that are unnecessarily burdensome relative to their supervisory value.

One of the more practical changes may be invisible to most readers. For small and non-complex institutions, the EBA plans to pre-fill and publish ESG information directly through the Pillar 3 Data Hub using information already collected through supervisory reporting. That means smaller institutions will not need to recreate information regulators already possess.

It is a simple idea. It is also one that has often been absent from regulatory reporting frameworks. The standards further incorporate recommendations from the Joint Bank Reporting Committee on semantic integration, an effort aimed at ensuring that the same concepts are described consistently across reporting regimes. They also implement the updated NACE Rev. 2.1 economic activity classification system and formally retire the EBA's separate guidelines on non-performing and forborne exposures, which have now been incorporated into the CRR3 disclosure framework itself.

The final draft standards will now be submitted to the European Commission for adoption. Assuming adoption proceeds as expected, the revised requirements will apply from a reference date of 31 December 2026. Small and non-complex institutions will begin reporting one year later, with a first reference date of 31 December 2027.

For years, debates around financial regulation have tended to assume a choice between transparency and simplification. Regulators either collect more information or reduce burdens. The EBA is attempting to collect information from a wider range of institutions while asking for less of it. Whether that balance holds in practice will become clear once banks begin reporting under the new regime. But after several years of steadily expanding disclosure obligations, it is notable that one of Europe's principal banking regulators now appears focused not on adding another layer of reporting, but on deciding which layers can be removed.

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