Agefi Luxembourg - novembre 2025

AGEFI Luxembourg 16 Novembre 2025 Économie By Jean-Philippe PETERS, Partner and Maria Josefin JOHANSSON-JUUP, Senior Manager at Deloitte Luxembourg Entering a new era of prudential supervision O n 11 January 2026, a subtle yet profound shift will occur in the pruden- tial supervision of European banks. Under the revisedAr- ticle 76(2) of theCapital Re- quirementsDirectiveVI (1) , every EUcredit institution will be required to prepare specific plans that include quantifiable targets andpro- cesses tomonitor and ad- dress the financial risks arising in the short, mediumand long termfromenviron- mental, social and governance (ESG) factors. These plans are usually referred to as the prudential transitionplan. Thisrequirement,furtherelaboratedintheEBA’s2025 Guidelines on the Management of ESG Risks, intro- duces a long-termperspective onprudential require- ments, explicitly linking financial resilience with the short, mediumand long-termtransition to a climate- neutral economy. Unlike disclosure-oriented plans under the Corporate Sustainability Reporting Direc- tive(CSRD)orCorporateSustainabilityDueDiligence Directive (CSDDD) that focus more on decarboniza- tion and alignment with climate goals and rather act asmarketingorreputationalinstruments,thepruden- tialtransitionplanisasupervisorytoolthatwillbere- viewedunderthesupervisoryreviewandevaluation process(SREP)andthatmustwithstandthesamede- gree of scrutiny as capital and liquidityplanning. In effect, the EBA has placed the transition to a sus- tainable economy squarely within the scope of pru- dential regulation, a conceptual move that will rede- fine howbanks think about risk, strategy and time. Governance and the central role of theCRO Attheheartofthenewregimeliesgovernance.Recent publicationsissuedbytheEBA (2) andtheECB (3) detail- ingsupervisoryexpectationsintermsofinternalgov- ernance are explicit: the management body bears ultimateresponsibilityfordefiningandapprovingthe transition plan, ensuring that it aligns with the insti- tution’s risk appetite, business model and long-term viability. Yet, while the Board sets the tone, the Chief RiskOfficer(CRO)becomestheconductorofthisnew prudential symphony. Fromguardian to strategist Traditionally, the CRO’s mission has been to safe- guard stability by quantifying and mitigating risks. AccordingtoEBA’sproposedrules,thatmandateex- pands. Today, the CRO is expected to link ESG tran- sitiondynamicswiththebank’sfinancialarchitecture, translating climate trajectories, regulatory pathways, and technological shifts into forward-looking impli- cations for credit,market, andoperational risk. This means developing a comprehensive ESG risk taxonomy, mapping transition and physical risks to traditionalcategories,anddesigningthescenariosand methodologies that will underpin the plan. The risk function must define plausible orderly, disorderly, anddelayed-transitionscenarios,drawingoncredible sources such as theNetwork forGreening the Finan- cialSystem(NGFS),theInternationalEnergyAgency (IEA), or the Intergovernmental Panel on Climate Change (IPCC), and calibrating them over at least a ten-year horizon, as mandated by CRD VI. But the CROismorethanamodeler;therolemustevolveinto an enabler of strategic dialogue, leveraging insights fromstresstestingandscenarioanalysistoshapeport- folio choices, pricing, capital allocation, and client en- gagement. The important role of the other internal control functions Thecompliancefunction,astheotherkeycomponent of the second line of defense, ensures consistency between the transition plan and other sustainability- related public disclosures, guarding against “green- washing by inconsistency.” The internal audit func- tion,meanwhile,isexpectedtoperformindependent assurance over the entire governance chain—from data lineage to model validation—confirming that ESG riskmanagement is subject to the same rigor as credit andmarket risk. Within the ECB’s risk-culture framework, the transi- tionplanbecomes a litmus test of an institution’s val- ues. Boards and executives are expected to foster a culture where long-term resilience takes precedence over short-term yield. Incentives, training and tone- from-the-top will thus be decisive in determining whether the plan is livedormerelywritten. Integrating transitionplanning withbusiness strategy A credible transition plan cannot be an annex to the risk framework; it must sit at the core of the business strategy.Athree-stepapproachtobuildastrongtran- sitionplan,andturningESGriskintostrategicadvan- tage is outlinedbelow. Diagnose: Understanding exposures and depen- dencies The starting point is a complete materiality assess- ment. Banks must map their sectoral, geographical and counterparty exposures to transition and physical risk drivers. A Northern European lender, for instance, may find high exposure to manufacturing clients dependent on fossil-intensive supply chains.ASouthernbankmaybemorevul- nerable to physical climate shocks affect- ingagriculturalportfolios.Thisdiagnostic phase goes beyond quantitative analysis, it also assesses strategic dependencies by identifying which business segments are likely to grow, stagnate, or decline across different transition scenarios. In Luxembourg, such an assessment was already required under CSSF Circular 21/773 on the management of climate- relatedandenvironmentalrisks.Thework carried out to comply with this circular— whichwillbeamendedorreplacedfollowing the transposition EBA Guidelines—should befullyleveragedinthedevelopmentofthe transitionplan. Re-allocate: Aligning portfolios with transition pathways The EBA guidelines require banks toembedlong-termtransitiontra- jectories into strategic planning. In practice, this translates into portfolio realignment, such as “portfoliotilting”strategies:pro- gressively increasing exposure torenewableenergy,energy-effi- cienthousingorelectricmobility, while gradually reducing car- bon-intensive lending. Scenario analysis enables banks to test how different alloca- tion choices affect profitability and risk over time. Re-invent: Newproducts and client engagement Transitionplanningalsostimulatesinnovation.Banks can design “transition-linked” loans whose interest margins adjust to clients’ emissions performance or provide advisory services helping SMEs to decar- bonize. Such innovations convert regulatory obliga- tion into commercial opportunity. For large institutions, the prudential plan becomes a strategicinstrumentalwaytodifferentiatecompetitive positioningbydemonstratingthatthebusinessmodel itself is resilient in a 1.5°Cworld. (4) Leveraging on other applicable sustainability reporting framework The multiplicity of ESG regulations can easily lead to fatigue. Yet, when approached strategically, other applicable sustainability reporting frameworks can become powerful enablers of the prudential transi- tion plan. The EBA encourages institutions to reuse data already collected under other sustainability re- porting framework - including but not limited to CSRD, CSDDDandPillar 3 disclosures – to support prudential objectives.As theCSRDand the EUTax- onomyisundergoingrevisionthroughtheproposed Omnibuspackage, thenear-termpriorities forEuro- pean banks will be the development of the pruden- tial transition plan. Key elements such as emissions inventories can directly inform the transition plan’s materiality assessment and key metrics. This ap- proach creates a single, consistent data backbone en- hancing both transparency and riskmanagement. Typical structure of a transitionplanunder CRDVI and the principle of proportionality Asper theguidelines of theEBA, the structureof the transitionplancouldbeorganizedalongside the fol- lowing fivemajor domains. What distinguishes a mature plan is not its length but its integration. The Transition Plan should be woven into the bank’s existing management cy- cles—such as budgeting, ICAAP review, product planning—so that transition risk considerations in- form decisions rather than follow them. Yet, the principle of proportionality should apply as supervisory authorities recognize that not all in- stitutions face the same materiality of ESG risks or possess equivalent resources. For significant institutions (SIs) Large, complex banks supervised directly by the ECB will be expected to implement comprehen- sive, quantitatively robust transition plans as from January 2026. Their transition plan should include multi-scenario modelling, granular sector-level analyses, and explicit integration into ICAAP and capital planning. They will likely be subject to on- site supervisory reviews, and the results could in- form Pillar 2 capital guidance. These institutions are also expected to demonstrate innovation: developing proprietary transition-risk models, integrating carbon pricing into credit de- cisions, anddeploying advanced analytics tomon- itor client alignment. For less significant institutions (LSIs) Smaller banks are not exempt but may adopt a qualitative, proportionate approach. They also have more time: their transition plan should be in place by January 2027. Scenario analysismay focus on a single baseline and one adverse path. Instead of complex quantitative models, LSIs may outline qualitative processes for client engagement, policy limits, and exposure monitoring. However, proportionality does notmean leniency. The EBA reminds that even small and non-com- plex institutions are not immune to ESG risks, par- ticularly those concentrated in local economies or sectors vulnerable to climate shocks. Every insti- tution must therefore be able to demonstrate awareness, governance and action commensurate with its risk profile. Conclusion The introduction of prudential transition plans marks an important milestone in European bank- ing. For the first time, the regulatory framework explicitly recognizes that the sustainability of the economy and the soundness of the banking system are inseparable. Banks that treat it as another reporting obligation may soon discover that the real risk is not regula- tory but strategic. Those that embrace this reform will indeed find that it offers more than compli- ance; it provides a structured lens through which to anticipate change, manage un- certainty, and capture newgrowth opportunities. 1)TransposedinLuxembourgviatherevised Article 53-12 of the Lawon Financial Sector, as proposed of the Draft bill 8627. 2) EBA’s revised Guidelines on Internal Governance (CP/2025/20) 3) ECB’s Draft Guide on Governance and Risk Culture (2024) 4) A 1.5°C world refers to a future scenario in which global average temperatures have risen by no more than 1.5 degrees Celsius above pre-industrial levels. It’s a central con- cept in climate policy and science, especially since the Paris Agreement (2015), where countries committed to limiting global warming to “well below 2°C” and to pursue efforts to keep it to 1.5°C. The transition plan under CRD VI: From regulatory compliance to strategic resilience Section ȱ Purpose ȱ and ȱ key ȱ contents ȱ 1 . ȱ S trategic ȱ objectives ȱ and ȱ roadmap ȱ Defines ȱ purpose, ȱ scope, ȱ time ȱ hori z on ȱ and ȱ governance . ȱ Demonstrates ȱ board ȱ oversight, ȱ committee ȱ structure ȱ and ȱ review ȱ cycles . ȱ Provides ȱ a ȱ high Ȭ level ȱ narrative ȱ linking ȱ E S G ȱ risk ȱ management ȱ to ȱ strategic ȱ vision . ȱ 2 . ȱ Targets ȱ and ȱ metrics ȱ S ets ȱ measurable ȱ objectives ȱ and ȱ interim ȱ milestones — such ȱ as ȱ financed Ȭ emissions ȱ reduction, ȱ Green ȱ Asset ȱ R atio ȱ trajectory, ȱ exposure ȱ to ȱ transition Ȭ ready ȱ clients, ȱ and ȱ establishes ȱ early Ȭ warning ȱ indicators . ȱ 3 . ȱ Governance ȱ Describes ȱ methodology ȱ for ȱ identifying ȱ material ȱ E S G ȱ risk ȱ drivers, ȱ mapping ȱ them ȱ to ȱ exposures ȱ and ȱ business ȱ lines, ȱ and ȱ presents ȱ key ȱ findings ȱ (e . g . ȱ sectors ȱ contributing ȱ > ȱ 8 0 ȱ % ȱ of ȱ transition ȱ risk) . ȱ 4 . ȱ Implementation ȱ strategy ȱ O utlines ȱ how ȱ the ȱ bank ȱ will ȱ achieve ȱ its ȱ strategic ȱ objectives ȱ across ȱ core ȱ banking ȱ activities ȱ in ȱ the ȱ short, ȱ medium, ȱ and ȱ long ȱ term, ȱ including ȱ targets ȱ related ȱ to ȱ risk ȱ management ȱ and ȱ decision Ȭ making ȱ 5 . ȱ Engagement ȱ S trategy ȱ Provides ȱ a ȱ description ȱ of ȱ the ȱ bank ’ s ȱ policies ȱ for ȱ engaging ȱ with ȱ counterparties ȱ and ȱ stakeholders ȱ including ȱ the ȱ scope, ȱ frequency, ȱ actions ȱ and ȱ escalation . ȱ D ans le cadre d'unemission finan- cière organisée avec Luxembourg for Finance (LFF), leministre des Finances, GillesRoth, s'est rendu à Lon- dres le 11 novembre. Au cours de son déplacement, Gilles Roth a ren- contrédesreprésentantsd'acteursmajeursdusec- teur financier britannique afin d'échanger sur les enjeux de compétitivité et d'intégration desmar- chésfinancierseuropéens.Lesentreprisesrencon- trées ont souligné leur intentionde poursuivre et d'intensifier le développement de leurs activités européennes à partir duLuxembourg. Le ministre a également participé à un dîner de haut niveau organisé par le Financial Times, en partenariat avec LFF, rassemblant des déci- deurs internationauxdu secteur. Lorsdesonintervention,GillesRotharappelé l'importance du partenariat entre le Luxembourg et le Royaume-Uni et a appelé à faire de la diversité européenne un véritable moteur de compétitivité à l'international. Il a insisté:«L'Europenemanquenid'idées,nide talents, ni d'épargne. Ce qui lui manque, c'est l'échelle. Nous devons connecter nosmarchés et permettre à l'innovation et au capital de cir- culer librement à travers les frontières ». Leministreaégalementsoulignéquelasuper- vision centralisée n'est pas la bonne voie pour yparvenir. «Ce dont nous avons besoin, c'est de confiance, de cohérence et de convergence des pratiques de supervision, et non de nouvelles couches de bureaucratie. L'objectif doit être d'élargir lesmarchésetdestimulerlacroissance,pasd'alourdir les institutions ». Il a conclu en invitant à renforcer la confiance et l'intégrationafinde restaurer la compéti- tivité et le leadership économique de l'Europe. Aucours de lamission, leministre a également parti- cipé en direct à l'émission «The Opening Trade» sur Bloomberg (cf. photo), où il a souligné l'urgencepour l'Europe de renforcer sa compétitivité face à des besoinsd'investissementsansprécédent–delatrans- formation numérique à la transition énergétique et à la défense. Il amis en avant le rôle essentiel du centre financier international et transfrontalier du Luxembourgpourmobiliser ces capitaux. Source :ministèredesFinances Gilles Roth en mission financière à Londres : « Connecter les marchés pour restaurer la compétitivité européenne » © LuxembourgforFinance