(1)

To ensure that the property under construction, as referred to in Article 124(3), point (a)(iii), of Regulation (EU) No 575/2013, is completed within a reasonable timeframe, the legal mechanism referred to in Article 124(3), point (a)(iii)(2) of that Regulation should provide for a protection provider that is able to act in a reasonable timeframe and has sufficient credit worthiness.

(2)

Credit institutions and insurance undertakings that are authorised in the Union are subject to robust prudential requirements. For that reason, they are best placed to act as protection providers.

(3)

To ensure that the legal mechanism referred to in Article 124(3), point (a)(iii)(2) of Regulation (EU) No 575/2013 is equivalent to the arrangements referred to in that Article, it should form part of the national law applicable to the construction of the residential property

(4)

Where the protection is provided by the entity benefiting from that same protection, there would be no reduction of risk, as that entity would simultaneously benefit from the guarantee and be liable for it. Therefore, where both the lending institution and the protection provider belong to the same group, the treatment should not apply at a consolidated level. Instead, the recognition of risk mitigation benefits arising from the completion guarantee, specifically, the treatment of the property as completed, should be limited to the calculation of own funds requirements at the individual institution level.

(5)

As the coexistence of several protection providers may hinder coordination for the completion of the whole property, it is necessary to require either the completion guarantees for all the housing units in the residential property under construction are provided by the same entity, or that multiple protection providers jointly and severally provide a single guarantee.

(6)

To maintain the effectiveness of the completion guarantee and to ensure that the protection provider remains committed to the timely completion of the residential property, the protection provider should not be allowed either to increase the effective cost of the protection, or to unilaterally reduce the duration of that protection, or to cancel that protection. or to otherwise relieve itself from its obligations, except in cases related to unexpectable and unavoidable events covered by another insurance or guarantee.

(7)

A completion guarantee may be turned into a repayment guarantee, which can have as a consequence that the obligor receives financial compensation from the protection provider. To avoid that the obligor can freely dispose of such compensation, he or she should be obliged to transfer such compensation to the lending institution, to reimburse the loan secured by the unfinished property.

(8)

This Regulation is based on the draft regulatory technical standards submitted to the Commission by the European Banking Authority.

(9)

The European Banking Authority has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council (2),