- Question ID
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2017_3078
- Legal act
- Regulation (EU) No 575/2013 (CRR)
- Topic
- Credit risk
- Article
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208, 229
- Paragraph
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3, 1
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Not applicable
- Article/Paragraph
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N/A
- Type of submitter
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Consultancy firm
- Subject matter
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Valuation of immovable property performed by statistical model
- Question
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Does the reference to the independent valuer in Article 229(1) and Article 208(3)(b) of Regulation (EU) No 575/2013 (CRR), permit the recognition of a statistical model of property valuation, the outcomes of which are periodically verified by other independent valuer, as independent valuer?
Does the reference to the independent valuer in Article 229(1) and Article 208(3)(b) CRR permit that before a credit decision, a property would be evaluated by a statistical model, the outcomes of which are periodically verified by another independent valuer, without additional confirmation by an independent valuer for each property valuation made by a model?
Does the reference to the independent valuer in Article 229(1) and Article 208(3)(b) CRR permit that before a credit decision, a property would be evaluated by a statistical model, where outcomes of a model are periodically verified by another independent valuer, and there is an additional confirmation or correction for the each statistical valuation, after a credit decision by another independent valuer?
- Background on the question
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A bank would like to enter a system for automatic valuation of immovable property, which is supposed to support of other independent valuers. That system is a statistical model, which valuates a property using current prices of properties on a similar market. The statistical model would be applied only for immovables, whose attributes allow to reliably valuate a property, because of great number of data. Outcomes of the model are periodically verified by another independent valuer. The bank would like to enter a solution which is in accordance with CRR, which is why it takes two solutions into consideration. A first first solution is when a property is valuated by statistical model before a credit decision, outcome of the model is periodically verified by another independent valuer, and there is no additional confirmation by an independent valuer (in person), for each valuation of a property made by a model. Second solution is where a property is valuated by statistical model before a credit decision, outcome of the model is periodically verified by another independent valuer, and there is additional confirmation or correction for the each statistical valuation, made after a credit decision by an independent valuer (in person).
- Submission date
- Final publishing date
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- Final answer
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According to Article 208(3) last subparagraph a statistical model may be used “to monitor the value of the immovable property and to identify immovable property that needs revaluation”. This last subparagraph clarifies how institutions could monitor the value of the property, according to article 208(3)(a). In contrast, Article 208(3)(b) CRR requires that “the property valuation is reviewed” under certain circumstances and that this “review is carried out by a valuer who possesses the necessary qualifications, ability and experience to execute a valuation and who is independent from the credit decision process”. Article 208(3)(b) CRR does not allow the use of a statistical model as the sole means of undertaking the review of the property valuation. The same applies to Article 229(1) CRR.
- Status
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Final Q&A
- Answer prepared by
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Answer prepared by the EBA.
- Note to Q&A
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Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant.
Disclaimer
The Q&A refers to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.