Sustainability Reporting (CSRD/ESRS) and the Banking Sector in the Western Balkans: Effects on Risk Premium and Credit Policies
DOI:
https://doi.org/10.5281/zenodo.18525291Keywords:
CSRD, ESRS, banking, credit policy, risk premium, cost of capital, ESG risk, Western Balkans, supervisory expectations, disclosure qualityAbstract
The Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS) are reshaping disclosure expectations in Europe with direct implications for banks’ credit decision-making, pricing, and risk governance. The first wave of CSRD reporters applies the new rules for FY2024, with reports published in 2025, and they must report according to ESRS. [3] This paper examines how CSRD/ESRS may affect banking-sector risk premia and credit policies in the Western Balkans through three transmission channels: enhanced information quality, supervisory ESG-risk integration, and market discipline. It proposes an implementation framework linking ESRS datapoints to bank risk models, loan covenants, and portfolio steering. Quantitative evidence is introduced via (i) a policy-coverage “scope shock” table reflecting late-2025 EU simplification proposals and provisional agreement details and (ii) real-market interest-rate dispersion (ECB cost of borrowing statistics) as a benchmark for pricing heterogeneity. Results indicate that stronger sustainability disclosure can reduce uncertainty and compress risk premia for credible borrowers, while persistent opacity increases credit frictions and spreads via an “uncertainty premium”. Regulatory volatility that narrows coverage may weaken comparability and increase bank-private data collection costs.
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