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FOR IMMEDIATE RELEASE 15 MAY 2001

‘PROPOSED GLOBAL BANKING STANDARD TO IMPACT LOANS TO REAL ESTATE’

The property and banking industries have always been intimately connected due to the suitability of property as loan collateral. The Basel Committee on Banking Supervision, which sets standards for global banking, recently issued proposals affecting banks’ capital adequacy provisions that have implications for the real estate sector.

The proposals for a New Basel Capital Accord run to some 390 pages. To assist those trying to understand the possible implications for real estate lending, the International Valuation Standards Committee today issued a paper “Property Valuation and Capital Adequacy in International Banks – A Review of the Proposed New Basel Capital Accord.”

IVSC technical consultant, John Rich, reviewed these proposals for the IVSC. He commented,

“Bank capital requirements may sound arcane, and the 390 pages issued by the Basel Committee are not an easy read. However, it is important that the real estate industry understands and responds to the proposals. The profession has all too often failed to makes its voice heard in similar international consultations. With real estate as a very significant form of collateral for loans, valuations are a key element of a robust lending, and it is important that there is no confusion or uncertainty both amongst banks and those they call upon to measure collateral.”

Greg McNamara, IVSC chairman, said, “While it is not the role of valuation standard setters to promote real estate as a sound and safe haven for money, none the less the fortunes of the two are inextricably linked. The poor performance of real estate has been at the heart of many financial crises in recent years. The IVSC has issued this paper as part of its commitment to the development of mutually supportive global standards that will strengthen both domestic and international financial systems.”

END

NOTES TO EDITORS

1. For further details, please contact John Rich, IVSC Technical Consultant – Tel: +44 (0) 1825 790450 or Marianne Tissier, Executive Director, IVSC – Tel +44 (0) 1442 879306.

2. Copies of the IVSC paper may be obtained from the IVSC Executive Director or on this website.

3. Publications of the Basel Committee on Banking Supervision are available on its web site.

4. The IVSC is an unincorporated association comprising professional valuation associations from some 50 countries. It has published International Valuation Standards (IVS) since 1985. The IVSC is an NGO (Non Government Organisation) member of the United Nations. IVSC maintains liaison with international agencies, such as the Organisation for Economic Co-operation and Development (OECD), the World Bank, the International Monetary Fund, the World Trade Organisation, the European Commission, and the Bank for International Settlements. IVSC also maintains a close relationship with standard-setting bodies such as the International Accounting Standards Board, the International Federations of Accountants, and the International Organisation of Securities Commissions. For further details on the IVSC or to obtain a copy of the International Valuation Standards, please contact the IVSC Executive Director.

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