The EBA consults on draft technical standards on equivalent mechanism for unfinished property under the standardised approach of credit risk

•    The EBA plays an important role in the implementation of the EU Banking Package. 
•    These draft regulatory technical standards are part of the first phase of the EBA roadmap for implementing the EU Banking Package in the area of credit risk.
•    These draft technical standards will contribute to a more a robust regulatory framework, efficient supervision, and enhanced risk control by credit institutions. 

The European Banking Authority (EBA) today launched a public consultation on its draft regulatory technical standards (RTS) under the Capital Requirements Regulation (CRR3) regarding the equivalent mechanism for unfinished property. These technical standards specify the conditions that a legal mechanism should meet in order to recognise a property under construction in the own fund requirements calculation under the standardised approach of credit risk. The consultation runs until 7 August 2024. 

The draft RTS clarify that an equivalent legal mechanism requires three conditions to be met:

1)    an entity should be required to or have committed in a legally binding manner to ensuring that the property under construction will be finished within a reasonable timeframe;
2)    this entity should have the legal powers and ability to do so;
3)    a counter guarantee is provided by a central government or assimilated entities. 

The consultation paper also presents an alternative approach, with a more comprehensive understanding of the equivalence legal mechanism and aimed to capture completion guarantees already in place in some EU jurisdictions.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 13 August 2024.

The public hearing on these draft RTS will take place via conference call on Tuesday 11 June 224 from 10.00 to 12.00 CEST. The EBA invites interested stakeholders to register using this link by Friday 7 June 2024 at 16:00 CEST.

Legal basis and background

The draft RTS have been developed according to Article 124(12) of Regulation (EU) No 575/2013 (CRR), as amended by the CRR3.