Details and Assessment Regarding the Communiqué on Banks’ Green Asset Ratio Calculation

Details and Assessment Regarding the Communiqué on Banks' Green Asset Ratio Calculation

The Communiqué on the Calculation of the Green Asset Ratio of Banks (the “ Communiqué ”), published in the Official Gazette dated 11  April  2025 and numbered 32867, sets out the procedures and principles regarding the calculation and reporting of the green asset ratio and other key performance indicators designed to measure banks' contributions to the financing of environmentally sustainable economic activities. The Communiqué requires banks to move beyond a product-based “labeling” approach to sustainable finance and to classify their on-balance-sheet assets based on a defined methodology, support such classification with documentation, and maintain the supporting documentation in an audit-ready manner throughout the reporting process.

The purpose of the Communiqué is to set out the procedures and principles regarding the calculation and reporting of the green asset ratio and other key performance indicators established to measure banks' contributions to the financing of environmentally sustainable economic activities. The Communiqué has been prepared in line with the strategic objective of developing green finance within the framework of the Sustainable Banking Strategic Plan (2022–2025) published by the Banking Regulation and Supervision Agency (the “ BRSA ”) in 2021, and embeds a set of performance indicators into the institutional reporting infrastructure that will enable banks' contributions to the transition to a green and sustainable economy to be measured in an objective, consistent, and comparable manner. This approach is also aligned with the green asset ratio methodology adopted as a primary performance indicator for credit institutions within the European Union. Reporting to the BRSA under the Communiqué commenced as of 30  June  2025.

Within this framework, the regulatory rationale of the Communiqué is based on requiring banks to substantiate their “green finance” claims not merely by declaration, but through ratios and supporting evidence. In practice, this approach necessitates an end-to-end compliance framework extending from credit origination to credit monitoring and data governance. Accordingly, the Communiqué establishes a holistic operational framework that goes beyond the financial reporting function and requires close coordination among credit, risk, compliance, internal control, and information technology teams. In this respect, the Banking Regulation and Supervision Board (the “ Board ”) is authorized to differentiate reporting periods and reporting obligations based on bank type and size.

Scope and Calculation Framework: How Is the Green Asset Ratio Calculated?

Under the Communiqué, the green asset ratio is calculated by dividing the eligible assets included in banks' unconsolidated balance sheets by the total assets within the scope of the green asset ratio. The total assets within the scope of the green asset ratio are determined based on the aggregate gross amounts measured at amortized cost of on-balance-sheet assets remaining after deducting (i)  receivables from central government public administrations, central banks, and supranational institutions, and (ii)  assets held in trading accounts, from total on-balance-sheet financial assets. This ratio structure, on the one hand, makes visible the volume of financing that is considered “aligned”; and, on the other hand, it serves inter-bank comparability through the manner in which the denominator is defined.

The most critical distinction introduced by the Communiqué in practice is established between eligible assets and aligned assets. Eligible assets cover on-balance-sheet financial assets related to economic activities falling within the scope of the technical screening criteria, and at this stage, it is not separately required to confirm that such criteria are in fact satisfied. Aligned assets, on the other hand, refer to the subset of eligible assets that simultaneously meet the conditions of (i)  making a substantial contribution to an environmental objective, (ii)  doing no significant harm to other environmental objectives, and (iii) complying with minimum social safeguards. This distinction enables the separate measurement, within a bank's portfolio, of “in-scope” financing and the bank's capacity to increase the share of such in-scope financing that qualifies as “aligned”.

Documentation and Monitoring

The Communiqué requires that, for assets to be considered as aligned, the technical screening criteria must be met and that compliance with, or future compliance with, such criteria must be substantiated through supporting instruments such as reports, certificates, technology selection tools, and expenditure documents. This structure necessitates that banks treat documentation not as an “annex” to the credit process, but as a constitutive element of the classification itself. Furthermore, banks are required to establish and keep audit-ready the documentation, classification, monitoring, and control processes relating to the assets constituting the numerator and denominator of the green asset ratio, as well as the reporting system supporting these processes.

In addition, with respect to assets with a maturity, the Communiqué provides for the principle that compliance with the technical screening criteria shall be confirmed and monitored throughout the entire maturity period. This provision requires banks to maintain the sustainability classification not only at the time of utilization, but throughout the credit life cycle, and to produce monitoring records in this regard.

Loans for Which the Use of Proceeds Cannot Be Determined: Exceptional Mechanism for Treatment as Aligned Assets

The Communiqué allows, subject to certain conditions, working capital loans for which the use of proceeds cannot be determined to be treated as “aligned assets”. This approach enables classification at the borrower level based on revenue composition and energy income criteria, even for credit products where expenditure-based monitoring cannot be performed. In this context, for such loans to be considered aligned, the borrower must have generated at least 90% of its turnover in the most recent financial year from aligned assets and must not have derived any income from non-renewable energy sources within the last year. However, this mechanism gives rise to an increased need for robust internal controls in terms of data verifiability and timeliness, as the risk of misclassification in these products arises primarily from the quality of borrower data.

Impact on Loan Agreements

The Communiqué does not directly impose reporting obligations on borrowers; Rather, it regulates banks as the addressees. Nevertheless, the requirement for banks to accurately calculate their green asset ratio and to maintain audit readiness effectively necessitates that borrowers provide certain information and documents to banks. Accordingly, the primary expected impact on loan agreements is not the addition of a single clause titled “green,” but rather the strengthening of the traditional contractual framework in a manner that reflects the documentation and monitoring logic of the Communiqué.

In practice, this will result in (i)  an expansion of the scope of information and document submission obligations, (ii)  the structuring of monitoring and verification mechanisms throughout the maturity period, and (iii)  the clarification of the default framework through documentation and reporting breaches. Banks are expected to incorporate into the contractual framework the submission and recency of reports, certificates, and expense documents forming the basis for aligned classification; to request re-verification and supplementary documentation where necessary; and, in turn, for borrowers to periodically provide information, notify changes that may affect classification, and enable the bank to exercise its inspection and audit rights. It is envisaged that breaches of these obligations, particularly failure to submit documents, submission of incomplete or misleading documents, disruption of monitoring reports, and obstruction of inspections, will be regulated as more visible and enforceable events of default.

Conclusion

The Communiqué establishes a ratio-based regime to measure banks' contributions to sustainable finance and regulates the classification and evidentiary mechanisms required to generate this ratio through a documentation-monitoring-reporting framework. For banks, this reporting regime elevates the matter from the level of “regulatory monitoring” to that of a “defensible file standard in terms of proper implementation and audit.” Moreover, the Board's authority to determine minimum thresholds and targets for the green asset ratio and other key performance indicators, and to apply necessary measures, including additional capital requirements, to banks that fail to comply with such thresholds or targets, demonstrates that the medium-term impact of the Communiqué will not be limited to reporting alone.