EBA publishes final guidelines on residential ADC exposures under CRR
The European Banking Authority (EBA) has published its final Guidelines on the treatment of Acquisition, Development and Construction (ADC) exposures to residential property under the Capital Requirements Regulation (Regulation (EU) No 575/2013) (CRR). The Guidelines specify the conditions under which institutions may apply a 100% risk weight, instead of 150%, to ADC exposures that meet defined credit risk mitigation requirements. These include a requirement that at least 50% of total contracts are pre-sale, pre-lease, or sale and lease contracts with specified deposit thresholds, and that the obligor has substantial equity at risk—set at 25% of the property’s value upon completion, reduced from 35% following consultation feedback and QIS data. The Guidelines also introduce more flexibility for public housing projects, allowing the first condition to be met based on demand exceeding supply and reducing the equity requirement to 20%, with a broader scope of eligible equity. These Guidelines form part of the first phase of the EBA’s roadmap on credit risk implementation of the EU Banking Package.