Collaborative Effort to Define Basel III Property Value in Real Estate Finance and Valuation

RICS is proud to be a partner in the recent publication of a pivotal paper on defining the Basel III ‘property value’. This paper, brought to life through a collaborative effort with industry peers such as the European Mortgage Federation-European Covered Bond Council (EMF-ECBC), the Spanish Valuers’ Association (AEV), the Association of Italian Property Valuation Companies (ASSOVIB), the International Valuation Standards Council (IVSC), the European AVM Alliance (EAA), and CREFC Europe, aims to offer clarity and guidance in implementing the concept.

Our collective goal with this paper is to provide guidance to both the European Commission and national authorities as they move to incorporate the Basel III ‘property value’ into the Capital Requirements Regulation (CRR) as set forth by the Banking Supervision (BCBS). This stipulates that property valuations be undertaken in a “prudently conservative manner”.

RICS understands the pivotal role property valuation plays in determining risk weights for both residential and commercial real estate exposures, which in turn influences banks' capital requirements. It is essential for our profession, as well as for the broader real estate finance industry, to have a clear and workable definition of the 'property value'. This paper seeks to lay down key components to facilitate the pragmatic implementation of this concept in sync with CRR and BCBS guidelines.

Commenting on the paper's release, Luca Bertalot, EMF-ECBC Secretary General, highlighted the significance of this joint effort. He emphasized not only its importance in providing robust guidance in an evolving market but also its testament to the collaborative spirit of the real estate finance and valuation sectors in fostering market governance and achieving consensus on crucial topics.

As RICS, we echo these sentiments and remain dedicated to collaborating with industry peers to provide clarity, uphold standards, and promote best practices that benefit all stakeholders.

The paper can be found here: Operationalising the ‘Property Value’

For more information, please contact Sander Scheurwater, Head of Public Affairs AEMEA at sscheurwater@rics.org or Fausta Todhe, EU Public Affairs Manager, at ftodhe@rics.org.