The European Banking Authority (EBA) published final draft Regulatory Technical Standards (RTS) specifying what constitutes an “equivalent legal mechanism” for unfinished property exposures under the Capital Requirements Regulation (CRR), for the purposes of the Standardised Approach for credit risk. The RTS set out when a property under construction can be recognised in the own funds requirements calculation, aiming to ensure completion within a reasonable timeframe. The standards define conditions a legal mechanism must meet, including strict requirements for the protection provider and for guarantee terms. Compared with the approach consulted on, the final RTS adopt a broader framework that can recognise existing national completion guarantee schemes in certain Member States, subject to harmonised safeguards including minimum creditworthiness requirements (a 20% risk weight cap) and enforceability conditions. The RTS were developed under the mandate in Article 124(14) of the CRR, as amended by CRR3, and form part of the first phase of the EBA’s roadmap for implementing the EU Banking Package. The EBA has adopted the final draft RTS and submitted them to the European Commission.
European Banking Authority 2025-08-06
European Banking Authority finalises technical standards defining equivalent legal mechanisms for unfinished property exposures under CRR
The European Banking Authority (EBA) published final draft Regulatory Technical Standards (RTS) under the Capital Requirements Regulation (CRR) for unfinished property exposures, detailing conditions for recognising properties under construction in own funds requirements. The RTS include criteria for legal mechanisms, protection providers, and guarantee terms, allowing recognition of national completion guarantee schemes with safeguards like a 20% risk weight cap. Developed under Article 124(14) of the CRR, these standards are part of the EBA's roadmap for the EU Banking Package and have been submitted to the European Commission.