Banking Book Taxonomy Alignment Ratio (BTAR)
The Banking Book Taxonomy Alignment Ratio (BTAR) is a measure of the consistency between a company's financial reports and the EU taxonomy. This measurement is used to assess how closely reports comply with IFRS standards in terms of their structure and content. In particular, it can assist companies in complying with existing rules and regulations and help in the preparation of financial reports.
The Green Asset Ratio (GAR) is used to calculate sustainable investments at banks. The Green Asset Ratio (GAR) is the share of a bank's taxonomy-aligned economic activities and sustainable investments in its total assets. However, assets that are not aligned with the taxonomy include both assets that are not aligned with the taxonomy and assets whose sustainability cannot be assessed, for example, because they are not covered by the taxonomy or the NFRD/CSRD. As a result, many banks, particularly those focused on lending to SMEs, are unable to calculate their GARs in a meaningful way. To provide further information on the extent to which banks finance sustainable activities, the BTAR explicitly includes exposures to entities not covered by the NFRD/CSRD. The challenge for banks is then to collect the necessary data bilaterally from their customers or to estimate missing data. Nonetheless, a pure focus on GARs would give banks the incentive to lend only to companies covered by the NFRD/CSRD and discourage them from accompanying companies not covered by the NFRD/CSRD in their efforts to transition to carbon neutrality.