www.tegova.org October 2014 / Issue No. 9 Journal of the Recognised European Valuer The Shaping of a European Valuation Culture By Krzysztof Grzesik REV, Chairman TEGoVA The European fjnancial with the valuation of real estate, specially forefront of this. Some of the most notable crisis and its resolution focused on the relevant aspects of EU banking EU Economic Governance reforms include have been a turning directives and include guidance on market reforming planning law, addressing obstacles point for real estate rating and risk-related criteria for valuations. to retail development, instating or increasing because the reforms Also only EVS provide comprehensive recurrent property tax, updating the cadastral necessary to save guidance on Mortgage Lending Value . TEGoVA value on which the recurrent property tax is the euro have armed is now helping its member associations in based or broadening the tax base, liberalising the EU with property infmuencing their governments to put the rent controls and increasing construction market-shaping power Directive’s valuation requirements into competition or simplifying construction law Krzysztof Grzesik exemplifjed by the practice. procedures. speaking at the Mortgage Credit At the same time banking supervision has TEGoVA’s edge has been to understand international valuation Directive, Banking fallen to the EU. Most banks in Europe are the impacts of European integration on conference in Bucharest last month Union and Economic now controlled by the European Central Bank real estate and to gear our production to (see report page 2) Governance, with game which stipulates that they should value their this. Thus our European Valuation Standards, changing impact on valuation. real estate exposures in line with European Recognised European Valuer qualifjcation The Mortgage Credit Directive is Valuation Standards within the Asset Quality and Minimum Educational Requirements designed to protect borrowers by addressing Review . If other standards are chosen, in case have become the backbone of an emerging irresponsible lending. A key aspect to that is of confmict, EVS prevails. European Valuation Culture . the provision that member states must ensure The EU has also developed so called TEGoVA will ensure that such culture reliable valuation standards for mortgage “Economic Governance” as a non- becomes fjrmly embedded across the lending purposes. TEGoVA’s European harmonising way to get governments to continent, with the aim of raising the profjle Valuation Standards (EVS) are the best for that confront and compare their policies and and status of our real estate valuation profession. • purpose because they are solely concerned agree on reform. Real estate has been at the A Makeover But yes indeed, the report titled “A Market Value, about to enjoy a renaissance? Vision for Real Estate Finance in the UK – It certainly appears that way given that Recommendations for reducing the risk of under Article 124 (4) (a) CRR, the European for Mortgage damage to the fjnancial system from the next Banking Authority is required to develop draft commercial real estate market crash” has regulatory technical standards to specify: Lending Value been produced by a cross-industry real estate “the rigorous criteria for the assessment of the fjnance group sponsored by the London based mortgage lending value …” Investment Property Forum. The so-called CRR/CRD IV package which By the Editorial Team The authors recognise that “The UK has an transposes -via a Regulation and a Directive- exceptionally strong tradition in market value the new global standards on bank capital (the “… CRE lenders subject to regulatory valuation, underpinning a very liquid and Basel III agreement) into EU law came into capital rules, loan-to-value (LTV) based capital transparent CRE market, but no such tradition force on 1st January this year. In connection requirements should be linked to a long-term of measuring long-term value”. They conclude with property valuation the CRR sets out two measure of collateral value that is insensitive that “while the UK could choose to adopt regimes: the market value and the mortgage to the investment cycle” (Recommendation 4 – a model for long-term value already in use lending value (MLV). Investment Property Forum Report May 2014) elsewhere, a new approach (albeit benefjting It is likely that any Regulatory Technical Who would have thought that the above from the experience of others) may be better Standards on MLV will set out the detailed recommendation whilst not proposing outright able to meet the specifjc objectives of the methodology to be applied in arriving at adoption of mortgage lending value, comes vision in the context of the UK CRE market.” Mortgage Lending Value. In this respect from a report of a group based in the United So is the concept of Mortgage Lending TEGoVA will be ready to respond to any future consultation. • Kingdom, the spiritual home of market value? Value, for so long the poor relation to
ANEVAR Opens CRR/CRD IV Package Forces Debate on Mortgage Immediate Uptake of EVS Compliant Lending and European Market Value Banking Union Definition • DIRECTIVE 2013/36/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment fjrms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC • REGULATION (EU) No 575/2013 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 26 June 2013 on prudential requirements for credit institutions and investment fjrms and amending Regulation (EU) No 648/2012 The above EU directive and regulation, the so called ‘CRR/CRD IV’ package, transposes the new global standards on bank capital (commonly known as the Basel III agreement) into the EU legal framework. Keynote speakers at ANEVAR Conference from left to right TEGoVA Chairman, Krzysztof Grzesik, Michael MacBrien, Director General, EPF, Adrian Vascu, President ANEVAR, Lothar Jerzembek, Head of Financial “While Member States will have Reporting, Valuation and Internal Audit, VÖB and Yang Feng, China Appraisal Society. to transpose the directive into The National Association of Authorized Krzysztof Grzesik, Michael MacBrien, national law, the regulation is Romanian Valuers, ANEVAR hosted a 2 day Director General of the European Property directly applicable.” valuation summit, on real estate valuation Federation, Yang Feng of the China Appraisal for mortgage lending purposes in Bucharest Society and J. Scott Robinson, Vice President on 8th and 9th September, coinciding with a of the Appraisal Institute. The new rules which came into force on meeting of the TEGoVA Board. Also Lothar Jerzembek gave a rousing 1 January 2014 tackle the problem of banks The fjrst day was devoted to a seminar presentation setting out a proposed strategy holding insuffjcient capital, often of a poor on TEGoVA's Property Market Rating tool for TEGoVA to secure an even stronger quality at that, having to be bailed out by as enhanced by The Association of German position in the European Union. Other national governments. The new framework Public Sector Banks (VÖB) to become the speakers included TEGoVA Board member sets stronger prudential requirements for latter's uniform standard for valuing property, Silvia Cappelli (ASSOVIB) and Vladimir banks, requiring them to keep suffjcient capital namely the " VÖB ImmobilienAnalyse" a web Ignatov of the Chamber of Independent reserves and liquidity. application, which allows valuers to determine Appraisers in Bulgaria (CIAB). The CRR/CRD IV package is not only of the opportunity and risk profjle for real estate The consensus amongst those attending signifjcance to the world of banking but also collateral. this unique two day summit was that European has an impact on real estate valuation. The property market rating tool was Banking Union now being implemented by The new framework divides the current presented by Lothar Jerzembek, Head of European Central Bank and the European CRD (Capital Requirements Directive) into two Financial Reporting, Valuation and Internal Banking Authority and will have a fundamental legislative instruments: a directive governing Audit, VÖB, Thomas-Andreas Ziesenitz harmonsing infmuence on the valuation the access to deposit-taking activities and Director of Real Estate, Valuation and Analyis profession in Europe. In order to maintain a regulation establishing the prudential VÖB, Stephan Henkel, Managing Director the momentum of this debate the TEGoVA requirements institutions need to respect. VOB Service GmbH and Stephan Zerbe of Board announced that the TEGoVA General While Member States will have to Landesbank Baden-Württemberg. Assembly in Berlin set for 18 April 2015 will transpose the directive into national law, the The following day, 350 local and foreign be preceded the day before by a European regulation is directly applicable. It creates law valuers attended ANEVAR'S international Valuation Conference titled "European with direct effect in all Member States without conference on valuation lending. Keynote Banking Union and an Emerging European any further action on the part of the national Valuation Culture" . • speakers included TEGoVA Chairman, authorities.
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