On 1 July 2025, the European Banking Authority (EBA) issued a Final Report on acquisition, development and construction (ADC) exposures to residential property under Article 126a of the Capital Requirements Regulation (CRR).

Background

ADC exposures are associated with heightened risk and attract a risk-weight of 150%. Institutions may, however, apply a risk weight of 100% to ADC exposures to residential property when, besides engaging in sound originating and monitoring standards, certain conditions reducing the credit risk of the exposure are met. More specifically, these conditions are listed in Article 126a(2) of the CRR, which states that a significant proportion of total contracts must consist of pre-sale and pre-lease agreements with substantial cash deposits, or sale and lease contracts (or where financing is ensured in an equivalent manner), and/or an appropriate amount of obligor-contributed equity to the residential property value upon completion.

Guidelines

The guidelines in the Final Report specify the terms under Article 126a of the CRR related to the credit risk reducing conditions that must be met to apply the 100% risk weight for ADC exposures to residential property. In line with the mandate, the guidelines also take into account the specificities of institutions’ lending to public housing or not-for profit entities across the Union that are regulated by national law and that exist to serve social purposes and to offer tenants long-term housing.

Next steps

These guidelines apply from two months after their publication in all EU official languages.