9.3.1 General considerations

Credit institutions should have defined collateral valuation approaches for each collateral product type; these should be adequate and appropriate for the type of collateral in question.

All immovable property collateral should be valued on the basis of market value or mortgage lending value, as specified under Article 229 of Regulation (EU) No 575/2013. Movable property should be valued at its market value.

For movable property, credit institutions should, in accordance with the requirements of Article 199(6) of Regulation (EU) No 575/2013, periodically assess the liquidity of the property. If there is material volatility in the market prices, the institution should demonstrate that the valuation of the collateral is sufficiently conservative.

For movable property, credit institutions should, in accordance with the requirements of Article 210 of Regulation (EU) No 575/2013, conduct a sufficient legal review confirming the enforceability of the collateral, including an assessment of the legal right to enforce and liquidate the collateral in the event of default, within a reasonable timeframe.

Overall valuations based only on the discounted replacement cost should not be used. For income-generating properties, a market-comparable or discounted cash flow approach can be used.

Property collateral should be valued in accordance with applicable international, European and national standards.³⁹

³⁹ These include the European Valuation Standards EVS-2016 (the Blue Book) and the Royal Institute of Chartered Surveyors (RICS) standards.