EAA joins forces with real estate finance industry and other valuation professionals to ‘Operationalise the Basel III Property Value’
The Paper is intended to offer guidance to the European Commission and national authorities in implementing and therefore operationalising the Basel III ‘property value’ currently being transposed into the Capital Requirements Regulation (CRR) as prescribed by the Banking Supervision (BCBS) which, alongside other features, requires that properties are valued “in a prudently conservative manner”.
Commenting on the publication, Stefano Magnolfi, Chairman of the EAA, stated:
“The EAA is very glad to be a co-signatory of this joint paper on Property Value. This new concept has to be implemented within a very short timeframe, and as leading providers of advanced statistical valuation solutions, it was important to us to be part of this sector initiative. Since the CRR does not offer a definition of this important term, we think this paper proposes a clear and constructive approach which is in line with the upcoming regulation while providing a stable and robust framework for the mortgage industry within the EU and the EEA.”
The valuation of immovable property is instrumental for the determination of the risk weights of residential and commercial real estate exposures and subsequently the calculation of banks’ capital requirements. The concept and definition of the ‘property value’ are therefore critical for both the real estate finance industry and the valuation profession. The key components outlined in the Paper will support the practical and proportionate operationalisation of this concept, in full alignment with the CRR and with the BCBS’ original recommendations.