EBA Cuts ESG Reporting Burden for Large Banks While Extending Disclosure to Smaller Institutions for the First Time

The European Banking Authority (EBA), the EU's banking supervisor, has published its finalised draft Implementing Technical Standards (ITS) updating Pillar 3 disclosure requirements on ESG risks for banks. Announced on 23 June 2026, the standards combine a significant simplification of the rules for large institutions with a first-of-its-kind extension of ESG reporting obligations — applied proportionately — to all banks, including the smallest.

Fewer datapoints, tiered by size

The headline effect is a substantial reduction in reporting burden. Under the new draft ITS, the number of ESG risk-related datapoints required from large listed institutions falls by 37%, from 2,614 to 1,648. Other listed institutions and large subsidiaries will report 1,368 datapoints, while small and non-complex institutions (SNCIs) face just 269 — some 84% fewer than their largest counterparts. The standards create a tiered structure: large listed institutions complete the full set of templates, other listed entities and large subsidiaries use a simplified set, and SNCIs report only a reduced, essential core of information.

From CRR3 to Omnibus

The move follows the EU Commission's 2024 Banking Package (CRR3), which extended the scope of ESG risk disclosures from only large institutions to all banks, in areas such as environmental physical and transition risks. It also reflects the EU's broader 2025 simplification drive, including the Omnibus I package that pared back sustainability disclosure requirements across the corporate sector. During that process the EBA had proposed streamlined Pillar 3 rules for smaller banks and issued a no-action letter advising regulators not to prioritise enforcement of the new requirements until the Omnibus outcome was clear. EU lawmakers finalised the Omnibus package earlier this year, paving the way for these standards.

Climate substance retained

Despite the lighter load, the substance of climate and sustainability reporting remains. All institutions must disclose information on ESG risks. Large listed institutions, other listed entities and large subsidiaries are required to report on environmental risk — including climate-related financial risks — alongside social and governance risks, climate transition risk through the credit quality of exposures by sector, emissions and residual maturity, and exposures subject to climate-related physical risk. For SNCIs, obligations are pared to qualitative information on ESG risks and simplified coverage of physical and transition risks. All banks must also disclose the total amount of their exposures to fossil fuel sector entities, and explain how they integrate identified ESG risks into business strategy, governance, processes and risk management — again under a lighter regime for SNCIs.

Dropping the Green Asset Ratio

The EBA said it paid particular attention to streamlining templates, consolidating datapoints, removing duplicative or low-use information, and embedding proportionality for smaller banks. One of the most consequential changes for large institutions is the removal of disclosures tied to the Green Asset Ratio (GAR) and to the alignment of financial exposures with the EU Taxonomy Regulation. The EBA noted that, as a result of the Omnibus process, a significant share of banks' counterparties now falls outside the scope of the Taxonomy and the GAR, leaving those metrics covering a shrinking slice of the market.

Balancing comparability and cost

The reform captures a balancing act at the heart of European sustainable finance: regulators want disclosure that is comparable and decision-useful for assessing climate and transition risk, but they are increasingly wary of imposing costs that smaller institutions struggle to bear. By cutting datapoints for the largest banks while drawing every institution into a proportionate framework, the EBA is betting it can widen the coverage of climate-risk transparency in the banking system without overwhelming its smaller members. The draft ITS now passes to the EU Commission for adoption.