ABBL contributes to joint ESAs consultation on ESG stress testing guidelines

Key objectives of the consultation

The draft guidelines aim to establish a harmonised and consistent framework for how ESG risks should be incorporated into supervisory stress testing by national competent authorities. These exercises are intended to assess capital and liquidity resilience, business strategy and long-term exposure to ESG-related risks.

The ESAs propose a risk-based, proportionate approach that will evolve as methodologies and data mature, starting with environmental risks and expanding to social and governance dimensions.

Based on comments and answers received, the ABBL emphasised the following key priorities:

• Proportionality and practicality: the guidelines must account for the diversity of banking models (e.g. IRB vs. Standardised Approach) and respect the principle of proportionality, particularly for Less Significant Institutions (LSIs).
• Use of existing data: stress testing exercises should build upon ESG data already reported under frameworks such as the ESRS to avoid duplicative requirements and reduce operational burden.
• Scenario design: ABBL supports a top-down approach to scenario design, starting with sectoral and geographical assessments, which are already well understood by banks.
• Simplification of materiality assessments: criteria for determining material ESG risks should be clear, measurable, and aligned with existing EBA risk management guidelines.
• Consistency across the EU: to prevent regulatory fragmentation, ABBL strongly recommends avoiding gold-plating and ensuring harmonised implementation across Member States.
• Data gaps and methodologies: expectations around the use of incomplete or low-maturity ESG data must be calibrated, and the limitations in modelling ESG risk interactions—especially spillover effects across financial sectors—should be acknowledged.