EU banking supervisor The European Banking Authority (EBA) announced the publication of its finalized draft Implementing Technical Standards (ITS) updating Pillar 3 disclosure requirements on ESG risks for banks, including significant simplification and streamlining of requirements for large banks, while for the first time extending the scope of ESG reporting requirements – in a proportionate manner – to all banks, including smaller institutions.

The new finalized draft ITS would reduce the number of ESG risk-related reporting datapoints for large institutions by 37%, while the smallest institutions would have to report 84% fewer datapoints than their larger counterparts.

The new release follows the publication by the EU Commission in 2024 of a Banking Package (CRR3), which included changes to reporting requirements for banks beginning in 2025, including extending the scope of ESG risks-related disclosures from only large institutions to all institutions, in areas such as environmental physical risks and transition risks.

As part of the EU’s simplification initiative in 2025, which included the Omnibus I package reducing sustainability disclosure requirements for companies, the EBA proposed a series of simplifications and clarifications around Pillar 3 ESG risk-related reporting requirements, particularly for small and medium-sized banks, and issued a no-action letter recommending that regulators not prioritize the enforcement of new ESG Pillar 3 disclosure requirements to await clarity on the outcome of the Omnibus process. EU lawmakers finalized the Omnibus package earlier this year.

The new ITS creates separate disclosure requirements for institutions, with large listed institutions subject to a full set of templates, other listed institutions and large subsidiaries subject to the simplified set of templates, and small and non-complex institutions (SNCIs) subject to a reduced and essential set of information.

Under the new ITS, all institutions will be required to disclose information on ESG risks, with large listed, other listed and large subsidiaries required to report on environmental risk, including climate-related financial risks, as well as social and governance risks, climate transition risks through credit quality of exposures by sector, emissions and residual maturity, and exposures subject to climate-related physical risk. For SNCIs, reporting obligations include qualitative information on ESG risks, and simplified information covering physical and transition risks.

The ITS also requires banks to disclose the total amount of their exposures to fossil fuel sector entities, as well as how they integrate the identified ESG risks into their business strategy, processes, governance and risk management, but using a simplified disclosure regime for SNCIs.

In its simplification initiative, the EBA said that it paid particular attention to streamlining templates, consolidating data points, removing duplicative or low-use information, and embedding proportionality mechanisms for smaller institutions.

Among the key changes for large institutions was the elimination of disclosures related to the Green Asset Ratio (GAR) and to the alignment of institutions financial exposures with the EU Taxonomy Regulation, with the EBA noting that a significant proportion of banks’ counterparties now fall outside the scope of the Taxonomy and GAR as a result of the Omnibus process.

Overall, the new ITS reduces the number of ESG risk-related datapoints for large listed institutions by 37% from 2,614 to 1,648, while other listed and large subsidiaries will be subject to 1,368 datapoints, and SNCIs to 269 datapoints.

The new draft ITS will now be submitted to the EU Commission for adoption.

Click here to access the new draft ITS.