EBA opinion on EC amendments to draft RTS on "equivalent legal mechanisms" under CRR

The European Banking Authority (EBA) has published an opinion and related letter regarding the European Commission's (EC') proposed amendments to the final draft regulatory technical standards (RTS). These RTS specify what constitutes an equivalent legal mechanism to ensure that a residential property under construction is completed within a reasonable timeframe, for the purposes of risk-weighting requirements under the Capital Requirements Regulation (CRR). The EBA is resisting the EC' proposal to increase the cap on the risk weight applicable to the protection provider from 20% to 30% under the standardised approach, arguing the 20% threshold represents a core prudential safeguard. It also recommends reinstating the requirement that the completion guarantee be required by the law of the Member State where the residential property is being built. In addition, the opinion provides targeted comments on certain drafting changes introduced by the EC, including the treatment of intragroup arrangements and specific provisions relating to enforceability and force majeure. A revised version of the draft RTS reflecting the EBA's recommended drafting adjustments is set out in Annex I to the opinion. The EBA notes that it remains committed to working constructively with the EC to ensure the timely adoption of a robust and legally sound framework.

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