9.1.3 Individual valuation of immovable property and use of indexation

Credit institutions should monitor the value of immovable property collateral on a frequent basis and at a minimum as specified in Article 208(3) of Regulation (EU) No 575/2013.

Indexation or similar methods may be used to monitor the value of a collateral and identify the collaterals requiring revaluation. This should be in line with the institution’s policy and provided that the collateral to be assessed is susceptible to accurate assessment by such methods.

Indices used to carry out this indexation may be internal or external as long as they are:

• a) reviewed regularly, with the results of this review being documented and readily available, and with the review cycle and governance requirements being clearly defined in a policy document approved by the management body;
• b) sufficiently granular, with the methodology being adequate and appropriate for the type of collateral in question;
• c) based on a sufficient time series of observed empirical evidence of actual property transactions.

Valuations and revaluations of immovable property collateral should be performed on an individual and a property-specific basis. Valuations and revaluations of immovable property collateral should not be carried out using a statistical model as the sole means of undertaking the review of the property valuation.

Competent authorities should define a common threshold for the individual valuation and revaluation of the collaterals used for NPEs by an independent appraiser. This threshold should be applicable to all credit institutions in the authority’s jurisdiction and should be publicly disclosed.