CRR3: Key Insights into the Real Estate Exposures

CRR3 has been in force since 1^st of January this year, and banks are preparing for the first reporting in Q2 2025. Given the substantial proportion of mortgage lending in Dutch banks’ balance sheets, the changes in CRR3 will significantly impact banks’ risk-weighted asset (RWA) calculations, capital adequacy, and overall lending strategies. The implementation of the new requirements still presents challenges in policy interpretation, data requirements, and capital impacts for such exposures.

CRR3 represents a significant shift in credit risk regulation and aims to enhance how banks assess and manage real estate-backed loans. The key changes for real estate exposures include the introduction of new Acquisition, Development, and Construction (ADC) exposures and Income-Producing Real Estate (IPRE) exposures, identifying such exposure classes and applying the appropriate risk-weighting approaches, as well as collateral valuation and management.