EBA responds to Commission’s proposed amendments to technical standards on legal mechanism

The European Banking Authority (EBA) published its opinion in response to the European Commission’s proposed amendments to the draft Regulatory Technical Standards (RTS). These standards specify what constitutes an equivalent legal mechanism to ensure the completion of a residential property under construction within a reasonable timeframe, as required by the Capital Requirements Regulation (CRR).

On 9 January 2026, the Commission informed the EBA of its intention to endorse, with amendments, the final draft RTS submitted by the EBA on 5 August 2025.

The EBA identified two substantive amendments proposed by the Commission that are not consistent with the prudential safeguards of the preferential treatment for residential property exposures.

• The first amendment proposes to increase the risk weight cap for protection providers from 20% to 30% under the Standardised Approach. The EBA emphasizes that maintaining the 20% threshold is crucial for consistency within the prudential framework and to prevent preferential capital treatment that could undermine the risk-based approach.
• The second amendment suggests removing the requirement that the completion guarantee be mandated by the law of the Member State where the property is being built. The EBA considers this requirement essential for ensuring the mechanism qualifies as a legal mechanism, thereby maintaining legal certainty and robustness.

This opinion reaffirms the EBA’s commitment to a harmonised and prudent application of the preferential treatment for residential property exposures.

Legal basis and background:

This opinion is issued under Article 10(1) of Regulation (EU) No 1093/2010, which mandates the EBA to provide opinions on amendments to draft RTS endorsed by the European Commission.

The relevant provisions are in Article 124 of Regulation (EU) No 575/2013 (CRR), which governs the prudential treatment of exposures secured by mortgages on immovable property, including conditions for preferential treatment for exposures to residential property under construction.

The EBA submitted its final draft RTS on 5 August 2025. The Commission notified the EBA of its intention to endorse the RTS with amendments on 9 January 2026, sharing a revised version. This opinion is the EBA’s formal response to those amendments.