The European Banking Authority (EBA) has published revised guidelines on product oversight and governance for retail banking products, introducing clearer requirements for financial products with environmental, social and governance features, as well as measures aimed at reducing greenwashing risks.
As the EBA noted in a statement, the updated guidelines are intended to strengthen consumer protection by ensuring that financial institutions apply consistent standards when designing and distributing ESG-related banking products.
It added that the changes are designed to ensure that consumers are not misled or sold products that don’t meet their needs.
‘More explicit’
‘Targeted amendments make ESG and greenwashing considerations more explicit throughout the product lifecycle, particularly where such products are marketed to consumers,’ the EBA said in a statement. ‘They have been introduced in key sections of the guidelines, including manufacturers’ internal control functions, identification of the target market, distribution channels, and information provided to distributors, as well as information and support for manufacturers’ arrangements.’
Elsewhere, the authority has updated the guidelines to reflect changes introduced through the revised EBA Founding Regulation in 2020, as well as more recent revisions to its internal governance guidelines under the Capital Requirements Directive and its guidance on the sound management of third-party risk. The authority said these changes remove outdated provisions and improve consistency with the current regulatory framework.
The revised guidelines build on the EBA’s original product oversight and governance framework introduced in 2016 to address conduct risks in retail banking and strengthen consumer protection.
‘Growing prominence’
As the EBA noted, recent legislative and market developments, in particular the ‘growing prominence’ of ESG products, have necessitated these revisions, to ‘better reflect ESG objectives and explicitly address greenwashing risks’.
It referenced the definition of greenwashing, as outlined by the European Supervisory Authorities (ESAs), as a ‘practice whereby sustainability-related statements, declarations, actions or communications do not clearly and fairly reflect the underlying sustainability profile of an entity, financial product or financial service’.
The guidelines will be translated into all 24 official EU languages over the course of this year, and will apply from 11 January 2027. Read more here.
