Eureka Case 25 min Sustainability

Forty-Five Days

You are Camille Duthoit, Head of Credit at Banque Méridienne Crédit in Lyon, and you chair its Credit Committee. The European Central Bank has given the bank 45 days to re-screen EUR 2.1 billion of recent loans. At this week's first meeting, the committee has to decide how.

The situation

The ECB's letter arrived on Monday 14 September 2026. A supervisory desk review found the bank's climate-and-environmental disclosures materially inconsistent with its own loan book: 31% of the loans booked in the first half of the year under a "sustainable" label did not meet the bank's own taxonomy criteria. The bank must re-screen EUR 2.1 billion of recent originations and report a corrected portfolio sustainability score.

The bank has EUR 38 billion in assets and a corporate and SME loan book of EUR 14.2 billion. Its supervisory board committed, in a public Sustainable Lending Charter, that by 2027 at least 40% of new corporate lending would be green or transition financing and the book's weighted ESG score would reach 70 out of 100. Today the score is 58 and the green and transition share is 24%. Return on risk-weighted assets, the figure the CFO watches most closely, is 0.9% against a 1.1% hurdle.

If the ECB concludes that the bank governs these risks poorly, it can require 0.4 percentage points more capital: EUR 95 million the bank could otherwise lend, in a quarter when it needs at least EUR 100 million of new lending to keep operating normally. Meanwhile two borrowers the committee classified as transition financing last year, a logistics operator and a textiles group with EUR 145 million of exposure between them, are missing payments; their combined probability of default has risen from 1.2% to 3.8%.

You have been Head of Credit since 2019. You signed off, with the rest of the committee, on the loans the ECB is now questioning, and on the Charter that made the targets binding. Relationship managers are still paid on loan volume, and until this letter the committee's habit was to apply the sustainable label generously.

Your job in this case: look at where the book stands against its commitments, test what each way of re-screening would leave on the record and put at risk, and decide how the committee will re-screen the EUR 2.1 billion.

The decision

How does the committee re-screen the EUR 2.1 billion of labelled loans?

  • A · Apply the taxonomy rule by rule, strip what fails
  • B · Defend the existing labels as consistent with intent
  • C · Reclassify the failing loans as transition finance

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