The implementation of long-termprudent valuation models across theUK and Mainland Europe for financialregulation purposes |
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Citation: Neil Crosby, Aart Horjijk (2023). The Implementation of long-term prudent valuation models across the UK and Mainland Europe for financial regulation purposes
DOI: https://doi.org/ Authors Neil Crosby, Professor Emeritus, University of Reading, UK Aart Hordijk: Professor (retired), Tilburt University, The Netherlands |
Summary:
The overall aim of the research is to assess the practicality of implementing a long-term prudent value model as an alternative to the market valuation model for use within UK and European Commercial Real Estate lending markets. In 2017 the Bank for International Settlements Basel Committee, which provides guidance on financial regulation internationally, proposed a new definition or framework for property valuation called prudent value. Although the Basel Committee only produce guidance, many jurisdictions are committed to following it wherever possible, including the EU. But the European Commission is the first jurisdiction to declare its intention to adopt this new valuation framework within its Capital Requirements Regulations (CRR) and the implications for the EU countries of this proposal is now a major driver for research into the new definition and its implications. In November 2022, the UK Prudential Regulation Authority published proposed changes to its financial regulations, and they also included the new Basel Committee valuation framework as the valuation basis for lending purposes at loan origination and for monitoring purposes Keywords: Long-term prudent valuation, financial regulation, market valuation model
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