European Banking Authority challenges Commission amendments to RTS on equivalent legal mechanisms for unfinished residential property

The European Banking Authority (EBA) published an Opinion responding to the European Commission’s proposed amendments to draft Regulatory Technical Standards (RTS) that define what constitutes an equivalent legal mechanism to ensure completion of a residential property under construction within a reasonable timeframe under the Capital Requirements Regulation (CRR). The EBA argues that two of the Commission’s changes would materially weaken the prudential safeguards supporting preferential treatment for certain residential property exposures. The Opinion objects to a proposal to raise, under the Standardised Approach, the maximum eligible risk weight for the protection provider from 20% to 30%, on the grounds that the capital treatment of an exposure should not become more favourable than warranted by the protection provider’s credit quality and that the 20% cap supports coherence in the prudential framework. It also challenges a proposal to remove the requirement that the completion guarantee be mandated by the law of the Member State where the property is being built, warning that doing so could reduce legal certainty and blur the distinction between a legal mechanism and a private contractual arrangement. The Commission notified the EBA on 9 January 2026 of its intention to endorse the EBA’s final draft RTS submitted on 5 August 2025 with amendments, triggering the EBA’s obligation under Article 10(1) of Regulation (EU) No 1093/2010 to provide a formal opinion.