On 10 November 2025, the ECB announced the imposition of periodic penalty payments amounting to EUR 187,650 on the Spanish bank ABANCA Corporación Bancaria S.A. The measure was adopted following the bank’s failure to comply with a prior ECB supervisory decision requiring it to conduct and document a comprehensive materiality assessment of climate-related and environmental (C&E) risks. The ECB had previously ordered all significant institutions to complete such assessments by 31 March 2024, reflecting the integration of C&E risks into prudential supervision. ABANCA allegedly did not meet this obligation within the prescribed timeframe, leading to the activation of the ECB’s enforcement powers. The decision can still be appealed to the Court of Justice of the European Union. Notably, the ECB emphasised in its press release on the case that the bank’s breach related not to disclosure deficiencies, but to incomplete internal risk assessment and documentation. According to the ECB, the failure persisted for a period of 65 days and concerned a “core supervisory expectation” under the ECB’s 2022 Guide on climate-related and environmental risks. The ECB reiterated that it expects banks to incorporate such risks into their business models, governance arrangements and risk-management frameworks, not merely as a matter of disclosure but as an integral part of capital and strategic planning processes. The enforcement action underlines the ECB’s determination to ensure that C&E risk management becomes an operational reality rather than a compliance formality. 

What makes this enforcement decision special is that it is the first published case of a penalty payment levied for shortcomings in climate-risk supervision. Moreover, it has been imposed as periodic penalty payments, i.e. a fixed amount for each day the respective institution remains non-compliant with the obligation, creating continuous financial pressure to comply. When determining penalties, the ECB takes into account the duration and materiality of the infringement, as well as the institution’s daily turnover. While the monetary amount might be regarded as modest compared to the potential fines for capital or liquidity breaches, the penalty’s symbolic impact is significant. It signals that non-financial risk dimensions – notably climate and environmental risk – have moved to the forefront of prudential supervision and that delays or qualitative shortcomings in disclosing and managing C&E risks may now lead to tangible financial consequences. 

EU law perspective 

The EU’s prudential framework for banks requires credit institutions to embed environmental, social, and governance (ESG) risks, including climate and environmental risks, into their governance, risk management, and business strategies. The framework is set out in the Capital Requirements Regulation ((EU) 575/2013, CRR) and the Capital Requirements Directive ((EU) 2013/36, CRD), as recently updated by the EU Banking Package consisting of CRR III ((EU) 2024/1623) and CRD VI ((EU) 2024/1619). CRD VI mandates that institutions must have robust, proportionate strategies and policies to identify, assess, manage, and monitor ESG risks over short, medium, and long-term horizons (at least 10 years). These requirements are operationalized through the EBA’s Guidelines on the management of ESG risks. These guidelines specify that institutions must conduct regular materiality assessments, integrate ESG risks into all traditional risk categories (credit, market, operational, liquidity), and develop transition plans aligned with the EU’s climate neutrality targets. Scenario analysis and stress testing for climate risk are required. EBA’s separate Guidelines on environmental scenario analysis (effective 2027) will provide further detail. The journey in integrating ESG considerations is not new for banks, at EU level, the ECB Guide on climate-related and environmental risks, which is non-binding, already applied as of 20 November 2020. ESG requirements also apply outside of the banking sector. For instance, Solvency II (Directive 2009/138/EC, as amended) and EIOPA’s guidance requires insurance companies to integrate climate risks into the Own Risk and Solvency Assessment (ORSA), with scenario analysis and materiality assessments being mandatory. 

On disclosure, CRR requires large institutions to disclose prudential information on ESG risks, including both physical and transition risks, using uniform templates. Further disclosure obligations derive from the Sustainable Finance Disclosure Regulation ((EU) 2019/2088, SFDR) and its RTS (Delegated Regulation (EU) 2022/1288) as well as the Corporate Sustainability Reporting Directive ((EU) 2022/2464, CSRD), which are currently under review. Please click here for our news update on the EU Parliament’s revised Final Position on CSRD and CSDDD.  

Swiss law perspective

In Switzerland, although the supervisory framework differs from that of the European Banking Union, comparable regulatory expectations are emerging under the oversight of the Swiss Financial Market Supervisory Authority (FINMA).  

Unlike the EU’s rule-based regulation, the Swiss approach can generally be characterized as principle-based, with specifications developed at the level of supervisory practice. In addition, Swiss prudential law does not (yet) include a direct analogue to the ECB’s power to impose periodic penalty payments. This might change. A draft law proposed by the Swiss Federal Council, which is currently under debate, aims to introduce further supervisory instruments for FINMA, including the ability to impose fines, enhanced early intervention powers, and an accountability regime for senior managers. This could further strengthen FINMA’s enforcement capabilities also with regard to climate and environmental risks. 

FINMA's supervisory practices

Apart from emphasising disclosure, FINMA has clarified in several supervisory communications and speeches that climate and environmental risks must be treated as risk drivers within traditional risk categories – in particular credit, market and operational risk. In its annual Risk Monitor, published on 17 November 2025, FINMA for the first time published a climate risk report on the current situation regarding climate risks at Swiss financial institutions, how the institutions are dealing with them and what measures FINMA itself is taking. FINMA expects banks and insurance companies to demonstrate how physical and transition risks affect their capital adequacy assessments and stress testing. Initial steps were taken in 2021 through FINMA’s amendments of Circulars 2016/1 (Disclosure – Banks) and 2016/2 (Disclosure – Insurers). These amendments, applying primarily to systemically important and large institutions (so-called supervisory categories 1 and 2), require boards to describe how climate risks are integrated into their governance, strategy, risk management and metrics/targets, broadly aligning with the TCFD (Task Force on Climate-related Financial Disclosures) framework. In 2025, Circular 2016/1 was merged into the FINMA Ordinance on the Disclosure Obligations of Banks and Securities Firms (DisO-FINMA).  

Under this framework, institutions are required to disclose material climate-related financial risks and their impact on business strategy, financial planning, and risk categories. They must also provide details on governance structures overseeing climate-related risks, including board-level responsibilities, and outline the risk management processes used to identify, assess, and mitigate such risks. Furthermore, respective institutions are expected to publish quantitative information, such as emission data, targets, and methodologies applied in scenario analysis and stress testing, alongside an evaluation of materiality, including the criteria and methods used to determine which climate risks are significant. 

Furthermore, FINMA has recently released the new Circular on Nature-related Financial Risks 2026/01, extending its focus beyond climate to encompass broader biodiversity and ecosystem considerations. The Circular applies to all banks and insurance companies, including financial groups and Swiss branches of foreign institutions, while excluding certain small banks and insurance companies. It requires the institutions to integrate nature-related risks into their governance structures, risk management systems, and stress-testing frameworks. The institutions must conduct forward-looking scenario analyses and materiality assessments, addressing both physical risks (e.g., extreme weather events) and transition risks (e.g., regulatory shifts, market changes). Responsibilities for managing these risks must be clearly allocated within governance structures, ensuring board-level oversight and strategic alignment. The circular draws on international standards, including those of the Basel Committee on Banking Supervision (BCBS), the International Association of Insurance Supervisors (IAIS), and the Network for Greening the Financial System (NGFS). The circular will be phased in gradually from 1 January 2026, initially covering climate-related financial risks, and will extend to all nature-related financial risks by 1 January 2028. Institutions in supervisory categories 3 to 5 will benefit from a transitional period until 1 January 2027 for the climate-related provisions.

Convergence and outlook

While Switzerland maintains its principles-based, proportionate supervisory approach, FINMA’s messaging is increasingly convergent with that of EU and ECB regulators: institutions are expected to move from qualitative disclosures toward quantitative, decision-relevant integration of climate and nature-related risks in their business models, capital planning, and governance processes. In particular, for Swiss banks and insurers with cross-border operations or EU affiliates, this alignment is essential to ensure regulatory consistency and to mitigate potential supervisory friction when subject to both Swiss and EU prudential oversight.