EBA consults on Taxonomy KPIs: Fees, trading book, OpEx
The European Banking Authority has launched a consultation on key performance indicators (KPIs) for Taxonomy disclosures. The discussion paper, requested by the European Commission, aims to improve the usability, relevance, and proportionality of the framework.
Refining capital market metrics
The EBA's discussion paper provides initial assessments and proposals for several key performance indicators (KPIs) under the Taxonomy Regulation.
It explores limiting the Fees and Commissions KPI to capital markets-related activities, offering options to either delete it, replace it with qualitative disclosures, or narrow its scope to specific services like issuance, M&A advisory, and product distribution.
For the Trading Book KPI, the EBA proposes refocusing it on providing market liquidity through market making, again considering deletion or a narrowed scope.
Additionally, the paper suggests narrowing the 'other services' KPI for investment firms to relevant activities such as portfolio management and investment advice, and discusses shifting its focus from revenue-based to asset value-based metrics.
The EBA acknowledges limited relevance and operational challenges for some of these KPIs in sustainability disclosures, seeking stakeholder feedback on these critical choices.
Group reporting and OpEx considerations
The consultation addresses horizontal issues relevant to the broader financial sector, developed in cooperation with other ESAs.
It concludes that current rules for group-level reporting, based on the prudential scope of consolidation for credit institutions, are fit for purpose but require clarification.
The ESAs advise against introducing a weighted KPI for group aggregation due to limited relevance and usability.
The paper also examines the potential voluntary use of OpEx information in financial KPIs, finding its usefulness limited and noting that incorporating it could increase complexity and administrative burden while reducing comparability.
The EBA also proposes simplifying disclosure templates for asset management activities, potentially merging them with those for off-balance sheet assets.
Practicality meets ambition
This consultation reflects a crucial effort to make ESG disclosures more practical and impactful for financial institutions.
By addressing specific KPI challenges, the EBA aims to reduce reporting burden without compromising transparency.
However, the debate around deleting certain KPIs highlights the ongoing struggle to define truly relevant metrics for sustainable finance.