ECB Finds Weaknesses in How Banks Value Commercial Real Estate
- Some banks are ignoring current market when using valuations
- Lenders’ defense cited lack of evidence that prices had fallen
Photographer: Alex Kraus/Bloomberg
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The euro region’s top financial regulator has warned of widespread issues in how banks value the collateral underpinning tens of billions of commercial real estate loans, highlighting the potential for lenders to underestimate their vulnerability to a property crash.
The European Central Bank has been undertaking on site inspections of banks’ processes since 2018, including asking property valuers for details of how they do their work, and has found “a range of problems in how banks commission or carry out valuations.”