The proportionality principle: how far must an institution really go?
Twenty-one times. That's roughly how many times the word "proportionate" appears in the ECB's consultation feedback statement on the RDARR Guide — not counting its occurrences in the Guide itself. Data governance, scope of application, the validation function, implementation choices: almost every requirement in the text comes with a "in a proportionate manner". But what does that word actually mean, in practice, for an institution that must comply with it?
Where the concept comes from
Proportionality is not an ECB invention from 2024: it is written into BCBS 239 from 2013. The Basel Committee's text specifies that national supervisors may choose to apply the principles to a wider range of banks than just the G-SIBs, "in a way that is proportionate to the size, nature and complexity of these banks' operations". (BCBS 239, "Scope and initial considerations" section)
Why the Guide applies to all significant banks, not just G-SIBs and D-SIBs
It is precisely this clause that the ECB invokes to justify a choice that surprised the EBF: the RDARR Guide is not limited to G-SIBs and D-SIBs (BCBS 239's original scope), but applies to all significant institutions. The ECB owns this: while BCBS 239 primarily targets G-SIBs and D-SIBs, the text itself allows its application to a wider scope, proportionately. European banking supervision sees a clear benefit in this for smaller significant institutions: a defined scope, sound governance of risk data aggregation and reporting, and a level playing field. The Guide will be taken into account proportionately, reflecting the nature, scale and complexity of each credit institution's operations and risk profile. (ECB consultation feedback statement, May 2024 — Table 1, comment 18)
"What does proportionate actually mean?" — the question asked head-on
The EBF eventually asked for a direct clarification: does "proportionate implementation" mean "implementation within the limits of the scope of application"? If so, why introduce an additional notion of proportionality? If not, what does it actually mean? The ECB's answer, read honestly, offers no numerical or universal definition: the text was amended to specify that implementation choices must be "fit for purpose" — a rewording, not an instruction manual. (ECB consultation feedback statement, May 2024 — Table 5, comment 16 — amendment made)
Proportionality can also remove requirements, not just soften them
One concrete example shows that proportionality is not just a reassuring phrase with no real effect on the text. KBC Group challenged the scope of a periodic reconciliation mentioned in paragraph 3.5.1 of the draft Guide, covering external sources such as credit bureaus, land registries or lists of national authorities — a requirement, in this respondent's view, that does not appear in BCBS 239 and is not proportionate for sound RDARR practices. The ECB ruled in the industry's favour on this specific point: the examples cited in paragraph 3.5.1 were removed from the final version of the Guide, to leave institutions sufficient room for proportionate implementation. (ECB consultation feedback statement, May 2024 — Table 5, comment 8 — amendment made)
Where proportionality concretely applies in the Guide
The principle runs through at least two key sections. On scope of application: the data governance framework must clearly define and document its scope, taking into account the nature, scale and complexity of the institution's operations and its risk profile. (ECB Guide, section 3.2) On the independent validation function: the organisational arrangements to be adopted must take into account the nature, size and scale of the institution, as well as the complexity of the risks inherent in its business model. (ECB Guide, section 3.3)
Key takeaway
Proportionality is neither a box to tick nor a magic phrase that exempts an institution from justifying its choices. The public consultation shows an ECB using it both ways: to extend the Guide's scope to banks BCBS 239 did not explicitly target in 2013, and to remove examples the industry considered disproportionate. What the ECB has never agreed to do, however, despite an explicit request, is give the word a numerical or universal definition. Each institution remains responsible for documenting, case by case, why its level of implementation is "fit for purpose" — and for being able to justify it to its supervisor.
This article is based on three documents: the Basel Committee's 14 BCBS 239 principles (January 2013), the ECB's RDARR Guide (May 2024), and the ECB's feedback statement on the RDARR Guide's public consultation (May 2024).