New construction guarantees: what banks must change in 2026

Key data

Banks financing real estate developments under construction face a new challenge. The Delegated Regulation (EU) 2026/849, published on 23 July 2026, establishes what legal mechanisms must exist to guarantee that a residential property under construction will be completed within a reasonable timeframe. Without that accredited guarantee, the loan cannot receive the preferential treatment of "exposure secured by residential real estate property" for regulatory capital calculation purposes.

The regulation completes the Regulation (EU) No 575/2013 (CRR), the cornerstone of banking capital requirements in Europe. This is not a minor change: it directly affects how banks classify and weight the risk of their entire developer credit portfolio.

What does this regulation establish?

The CRR allows banks to apply reduced risk weightings to loans secured by residential real estate. Until now, the regulation did not specify in detail what happens when the property is still under construction and therefore does not exist as an enforceable real guarantee.

Delegated Regulation (EU) 2026/849 closes that gap: it specifies what equivalent legal mechanisms allow a property under construction to receive the same preferential treatment. The condition is that such mechanisms guarantee completion of the work within a reasonable timeframe.

The mechanisms recognized by the regulation are:

• Guarantees for work completion
• Insurance for work completion
• Contractual retentions that ensure completion

These instruments already existed in sector practice, but now they must comply with specific European technical criteria to be valid for regulatory purposes. Banks cannot assume that their current contracts automatically comply with the new standards: they must verify this.

Economic and operational impact

The impact occurs on two simultaneous levels:

For credit institutions: If a bank cannot prove that the new construction loan has one of the valid mechanisms according to the regulation, that loan loses the reduced risk weighting. This means the entity must allocate more of its own capital to cover that exposure, which increases the cost of maintaining that portfolio and may reduce the profitability of the new construction mortgage business.

For real estate developers: If their guarantees, insurance or contractual retentions do not meet European technical criteria, the financing bank will not be able to apply the preferential treatment. The direct consequence is that the bank will pass on that higher capital cost to the interest rate of the developer credit or, in the worst case, restrict access to financing.

Who does it affect?

• Spanish credit institutions with a portfolio of loans on real estate developments under construction
• Mortgage banks specialized in new construction financing
• Real estate developers who finance their developments with bank credit
• Risk and regulatory compliance departments of financial entities
• CFOs and financial directors of developer groups managing relationships with financing entities
• Insurance companies and guarantee entities that issue work completion guarantees, as their products must adjust to the new technical criteria

Practical example

A Spanish bank has in its portfolio a developer loan of 10 million euros for a residential development of 40 homes under construction. Until now, the bank applied the reduced risk weighting typical of exposures secured by residential real estate, based on a work completion guarantee included in the financing contract.

After the entry into force of Regulation (EU) 2026/849, the risk department reviews that guarantee and detects that it does not meet one of the European technical criteria required (for example, it does not cover the reasonable completion timeframe as defined by the regulation).

Result: the bank cannot maintain the reduced weighting for that loan. It must recalculate its capital requirement for that exposure with a higher weighting, which increases the immobilized regulatory capital. If this scenario repeats across a significant portion of the new construction portfolio, the aggregate impact on the bank's capital ratio could be relevant.

The solution involves renegotiating with the developer the replacement or adaptation of the guarantee mechanism before the regulation becomes effectively applicable.

What should companies do now?

1. Review the developer credit portfolio: Credit institutions must identify all loans on residential properties under construction and verify what completion guarantee mechanism each transaction has (guarantee, insurance or contractual retention).
2. Compare existing mechanisms with the regulation's technical criteria: It is not enough that a guarantee or insurance exists; it must meet the specific requirements of Delegated Regulation (EU) 2026/849. The legal and risk department must conduct this review contract by contract.
3. Renegotiate or adapt contracts that do not comply: Where deficiencies are detected, begin renegotiation with the developer as soon as possible to replace or modify the guarantee mechanism before the effective application date.
4. Update internal developer credit granting policies: Incorporate the new European technical criteria as a mandatory requirement in all new construction financing transactions.
5. Coordinate with developers and guarantee entities: Developers must ensure that their guarantees, insurance and contractual retentions comply with the new standards. Insurance companies and guarantee entities must review and, if necessary, update their products.
6. Confirm the entry into force date: Since it is not specified in the published information, consult the official text on EUR-Lex to plan adaptation timelines with precision.

Official source

Consult complete regulation in official source

Disclaimer: This article is for informational purposes only and does not constitute legal advice. For specific decisions, consult a qualified professional. Source: https://eur-lex.europa.eu/./legal-content/AUTO/?uri=OJ:L_202600849