The EU implementation of the Basel III framework introduces in Article 4(1), point 79, of the Regulation (EU) 575/2013 (CRR) a new definition for a subset of exposures covering exposures related to Acquisition, Development, and Construction (ADC), which relate to exposures to corporates or special purpose entities (SPVs) financing any land acquisition for development and construction purposes, or financing development and construction of any residential or commercial immovable property. These ADC exposures are considered to be associated with heightened risk and consequently a specific risk weight of 150% is set out in Article 126a of the CRR. Notwithstanding institutions may apply a risk weight of 100% to ADC exposures to residential property provided that certain risk-mitigating conditions are met.
The EBA is in this regard mandated under Article 126a(3) of the CRR to specify the following terms identifying the credit risk-mitigating conditions listed under paragraph 2 of the same ar
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