8. Sustainability: A Current Driver in EU Banking and Insurance Regulation

It is not surprising that the topic of sustainability has reached the center of discussions in EU financial regulation. However, sustainability-related regulatory requirements for banks and insurance companies are still in their infancy. In the banking sector, the ECB and EBA published guidelines and reports specifying the ways in which banks must comply with sustainability requirements at the microprudential level, and the Commission has proposed far-reaching reforms as part of the Banking Package 2021. Similarly, EIOPA demanded the inclusion of climate change risk scenarios in the own risk and solvency assessment (ORSA) from the National Competent Authorities. However, the regulatory and supervisory framework for these regulated entities remains rather opaque. Banks and insurance companies face various sustainability-related regulations, such as disclosure, capital, business model and governance-related requirements. Against this background, this chapter first aims to consolidate, sort, and present the microprudential measures adopted by the EU in the area of sustainability for banks and insurance companies. In a second step, the banking and insurance regimes will be compared and evaluated. From this comparison, finally, cross-sectoral conclusions will be derived, inconsistencies disclosed, and proposals for improvement presented de lege ferenda. All of this serves to create a coherent system of EU sustainability supervision.