A European Central Bank investigation into how systemically important lenders carry out commercial property valuations has found widespread issues leading to banks reporting incorrect figures on the market value of assets, reports affiliate title PERE (registration required).
The findings of on-site inspections, which covered UK and North American institutions and have been underway since 2018, “found a range of problems in how banks commission or carry out valuations”.
Among the various contributing factors, inspectors found “too many” lenders struggling to collect information about the environmental, social and governance factors affecting CRE assets, including basic information such as energy efficiency ratings.
It added that only a few banks factored in the capital expenditures needed to improve energy efficiency to an acceptable standard in their affordability assessments.
In September 2023, affiliate title Real Estate Capital Europe highlighted the lack of a standard valuation practice for effectively appraising property assets in the context of climate crisis.
