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) concerning an equivalent legal mechanism for completing residential properties under construction within a reasonable timeframe, as specified in 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 that are inconsistent with prudential safeguards:

• Risk weight cap increase: The Commission proposed raising the risk weight cap for protection providers from 20% to 30% under the Standardised Approach. The EBA considers maintaining the 20% cap essential to ensure consistency and prudence within the capital framework, preventing preferential treatment that could undermine risk management.
• Removal of legal requirement: The Commission proposed removing the requirement that the completion guarantee be mandated by law of the Member State where the property is built. The EBA views this as fundamental to ensuring the mechanism qualifies as a legal mechanism, safeguarding legal certainty and framework robustness.

The EBA reaffirms its commitment to a harmonised and prudent application of the preferential treatment for residential property exposures.

This opinion is issued under Article 10(1) of Regulation (EU) No 1093/2010, in response to the Commission’s intention to endorse amended RTS. The relevant prudential provisions are outlined in Article 124 of Regulation (EU) No 575/2013 (CRR), which governs risk weights for exposures secured by mortgages on immovable property, including those under construction.

The EBA submitted its final draft RTS on 5 August 2025. The Commission notified its intention to endorse these RTS with amendments on 9 January 2026, prompting this formal response from the EBA.