In this issue, we provide an overview of our activities related to the EU Taxonomy and the Data Act as well as an overview of the latest some of the developments at EU level, such as the EBA’s 2020 Annual Report
Leaseurope has responded to the EU Taxonomy Article 8 Delegated Act, which sets out to prevent greenwashing through the disclosure of information related to the environmental performance of assets for example. In our response, we highlighted the need for consistency between the Corporate Sustainability Reporting Directive (CSRD) and Article 8, something that was also pointed out by the Technical Expert Group on SMEs in their final report. We also noted the need for consistent definitions of key performance indicators (KPIs), and the role the leasing industry can play in facilitating the green transition. We stressed the major impact the COVID-19 crisis has had on SMEs and that requiring these companies to comply with strict reporting requirements currently will likely exacerbate the problems they are facing. You can find our full response here.
Leaseurope recently provided feedback to the upcoming Data Act initiative (expected in Q4 2021). The Data Act will address B2B contracting frameworks alongside data specific issues ranging from privacy to governance, competition, cybersecurity and consumer issues. Leaseurope recently submitted a response to the feedback, tackling general connectivity and data sharing aspects and also calling for sector specific legislation for mobility. A full response will also be given to the more detailed consultation, which is open until September. In the meantime, you can access the feedback here.
The European Commission has just issued their proposal revising the Consumer Credit Directive (CCD). Notably, as expected, the scope of the Directive now includes leasing agreements, with the proposal stating “the main elements of the preferred option [includes] extension of the scope of the Directive to cover all leasing” (p6). The proposal also includes provisions on linked credit agreements and a consumers’ right of withdrawal, and an obligation to inform customers when they are being made offers based on automated processes (such as profiling). It also requires key terms and conditions to be made clear when this information is presented in a digital format, such as online. You can read the text of the proposal here.
The European Banking Authority (EBA) has published its Annual Report, which provides a detailed account of all its work over the past year and anticipates the key focus areas for the coming year. This report presents the measures the EBA undertook to mitigate the impact of COVID-19 on the EU banking sector. In particular, it covers their guidelines on loan repayment moratoria, as well as reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis. Although it was considered necessary to postpone the 2020 EU-wide Stress Test, it carried out an additional Transparency Exercise to provide updated information on banks’ exposures and asset quality to market participants. Similarly, the COVID-19 outbreak also triggered the publication of an ad-hoc impact study on the implementation of Basel III in the EU. The EBA addressed the issue of consumer protection in the area of payments and financial crime risks in relation to the COVID-19 pandemic.
The 2020 Annual Report also covers the strategic priorities for 2021, including a review of the stress-testing framework, implementation of AML/CFT mandates, financial innovation and sustainable finance.
The European Banking Authority (EBA) has published a Report on Environmental, Social and Governance (ESG) risks management and supervision. This is a key component of the EBA’s broader ESG work and provides a comprehensive proposal on how ESG factors and ESG risks should be included in the regulatory and supervisory framework for credit institutions and investment firms. It focuses on the resilience of institutions to the potential financial impact of ESG risks across different time horizons. This requires careful assessments by institutions and supervisors, who should take a comprehensive and forward-looking view, as well as proactive actions. This paper should be considered in conjunction with the EBA and ESAs disclosure publications under the Capital Requirements Regulation (CRR), the Taxonomy Regulation and the Sustainable Finance Disclosure Regulation (SFDR), which provide key metrics to support strategies and risk management. The EBA will publish its Pillar 3 disclosure requirements on ESG risks, transition risks and physical risks, as defined in this Report, later this year.
As part of its drive for more a proportionate regulatory and supervisory framework, the European Banking Authority (EBA) has finalised its comprehensive study of the cost of compliance of European Economic Area (EEA) banks with the supervisory reporting requirements. In the summary report, the EBA identifies 25 recommendations, focusing primarily on small and non-complex institutions, collectively leading to a potential reduction of bank reporting costs by up to 15-24%. Most of the recommendations will be implemented by the EBA as part of its ongoing policy work on developing and enhancing the common EU supervisory reporting framework. The study focuses on three main aspects. First, it tries to understand the actual reporting costs incurred by the EEA banks in relation to supervisory reporting, and in particular in relation to the EBA implementing technical standards (ITS) on Supervisory Reporting. Second, it assesses the effects of a reduction of some specific reporting requirements on reporting costs and supervisory effectiveness. Third, it assesses whether the reporting costs were proportionate with regard to the benefits delivered. In the report the EBA also looked at the classification of the EEA banks into various proportionality categories introduced in the Capital Requirements Regulation (CRR).
Last year marked a crucial shift for the automotive industry, with sales of diesel and gasoline cars collapsing and those for electric vehicles (EVs) surging. The number of EU charging points however, has to expand from 225,000 to at least 3 million by 2030 in order to hit the EU’s current 2030 target of cutting car emissions by 37.5%. The European Commission is investigating raising this goal to around 50%, which would require even steeper investments in charging points and green fuels like hydrogen. Stakeholders are expecting the Commission to reveal details (including the review of the CO2 standards for cars) in the reviewed Alternative Fuels Infrastructure Directive (AFID) as part of the ‘Fit for 55’ package (due 15 July), which addresses the EU’s long-term climate goal of reducing overall greenhouse gas output by 55% by 2030 and becoming climate neutral by mid-century.
The European Council and Parliament reached a political agreement on revised road charging rules (Eurovignette directive), to address greenhouse gas emissions and other environmental impacts, congestion and road infrastructure financing. Time-based vignettes will be phased out for heavy-duty vehicles on the core TEN-T network within eight years of the entry into force of the directive. In cases where member states apply a common system of vignettes, such as the Eurovignette Treaty, they will have two additional years to adapt or dissolve that system. Exemptions to the phasing-out of vignettes are allowed in duly justified cases, such as in cases of low population density or where a vignette applies to a limited section of a road, after the European Commission has been notified.
Member states will also have the option of setting up a combined charging system for heavy-duty vehicles, or for some types of heavy-duty vehicle, which would bring together distance- and time-based elements and integrate the two variation tools (the new one based on CO2 emissions and the existing one based on EURO classes). This system will allow full implementation of the ‘user pays’ and ‘polluter pays’ principles while allowing member states the necessary flexibility to design their own road charging systems. A new EU-wide tool will be introduced for varying infrastructure and user charges for heavy-duty vehicles based on CO2 emissions, as provided for by the Council’s original position. The variation will be based on the existing CO2 standards. Variation of tolls or user charges based on environmental performance will apply to vans and minibuses from 2026, where technically practicable. You can read more here and here.
The European Council adopted its position on the European climate law, setting into legislation the objective of a climate-neutral EU by 2050. In addition to the goal of climate neutrality after 2050, the European climate law sets a binding Union climate target of a reduction of net greenhouse gas emissions (emissions after deduction of removals) by at least 55% by 2030 compared to 1990. In order to ensure that sufficient efforts to reduce and prevent emissions are deployed until 2030, the climate law introduces a limit of 225 Mt of CO2 equivalent to the contribution of removals to that target. The Union will also aim to achieve a higher volume of carbon net sink by 2030. The Commission will also propose an intermediate climate target for 2040, if appropriate, at the latest within six months after the first global stocktake carried out under the Paris Agreement. At the same time, it will publish a projected indicative greenhouse gas budget for the period 2030-2050, together with its underlying methodology. The European climate law also establishes a European Scientific Advisory Board on Climate Change. You can read more here.
The European Parliament and Council reached an agreement to update the 2009 Motor Insurance Directive. This Directive ensures that vehicles can freely circulate in the European Union while using the same compulsory insurance. It means that when accidents occur, injured parties are protected through effective arrangements for compensation. The Directive better protects people by ensuring that all Member States set up bodies to compensate injured parties in a timely manner, in the event that the insurance company in question becomes insolvent. Until now, there have been no EU-level rules to ensure that injured parties are swiftly compensated in such situations. This has particularly affected those who have been covered by cross-border motor third party liability insurance. Experience has shown significant delays in the payment of compensation to injured parties in such cases. The revision also addresses uninsured driving, which is unfortunately a problem that also affects cross-border travel. It will now be possible to carry out checks on the insurance of vehicles registered in another Member State, and to exchange data. You can read more here and here.
On 6 July, Hume Brophy Communications is hosting a webinar on Sustainable Finance with Sean Fleming TD, Irish Minister for Financial Services & Insurance. In this webinar, the Minister will outline the Irish government’s priorities for the year ahead in supporting the European Green Deal Investment Plan by increasing private investment in sustainable projects and activities, coupled with the development of the EU’s Capital Markets Union (CMU) to assist and support the effectiveness of these green initiatives. You can register here.
On 14 July, Forum for Mobility and Society members will host a webinar exploring transport decarbonization, technological approaches, revised CO2 emission standards and alternative fuels within the European Commission’s upcoming “fit for 55” package, aimed at achieving a 55% Greenhouse Gases (GHG) emissions reduction target by 2030. You can read the agenda and register here.
On 15 July, Asset Finance International will be hosting an online interview with Murad Baig from Otoz Mobility on the debate between customer preference for online versus brick-and-mortar purchases and how dealers can leverage digital technologies. You can register here.
On 10 June the Car Rental Working Group met via conference call
On 24 June the Connected Vehicle Working Group met via conference call
On 12 July the Prudential Supervision Committee will meet via conference call