The Polish Financial Supervision Authority (KNF) has published a new Recommendation J regarding best practices for the collection and processing of real estate market data by banks.
The recommendations were originally created in 2012 to support risk management of banks as regards the monitoring of mortgage-backed credit exposures, especially the monitoring of the value of the collateralized real estate so as to prevent the build-up of credit and systemic risk. As such, they provide guidance on the collection of corresponding information and the implementation of data bases for purposes of maintaining and analyzing such credit exposures. Due to recent regulatory changes, the KNF has made some changes to the previous version which include the following:
- the new version integrates the possibility of financial institutions to use internal collateral assessment methodologies (versus statistical models) for the appraisal of commercial real estate collateral, if their own methodologies are „reliable and credible“; and
- the revised version contains an overhauled annex setting out the standard criteria by which real estate subject to a loan and collateral agreement should be classified by all banks. The revised version now only includes mandatory data to be assessed by all financial institutions, which, so the KNF, should be sufficient „to ensure that banks are able to manage the risk of mortgage-secured exposures in a manner consistent with supervisory objectives“.
The document overall covers
1. the collection of real estate market data (purpose, governance policies, staff responsibility assignment);
2. the creation of real estate market databases, including the maintenance of information on
– transaction prices based on the real estate sales contract (preliminary or promised contract, concluded in the form of a notarial deed);
– property values as disclosed in appraisal reports prepared by valuers; and
– the value of the mortgage collateral based on the bank’s assessment;
3. reliability of real estate databases (verification of data reliability); and
4. the use of real estate databases.
Other Features
assessment
banks
best practice
credit
limit
margin
market data
process
real estate
regulatory
risk
risk management
Date Published: 2023-03-27
Date Taking Effect: 2023-03-24
Regulatory Framework: Banking Act
Regulatory Type: procedure
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