Understanding and conveyance of internal valuation reports - Case study in the Finnish banking sector
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Journal Title
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Volume Title
Insinööritieteiden korkeakoulu |
Master's thesis
Authors
Date
2021-12-13
Department
Major/Subject
Mcode
Degree programme
Master's Programme in Real Estate Economics (REC)
Language
en
Pages
122+22
Series
Abstract
The new regulatory interpretations of the Articles 208(3)(b) No 575/213 (CRR) and 229(1) allowed commercial real estate valuations to be carried out by independent and competent internal valuers of banks operating within the European Union. Independent internal valuers have an important role in the internal value chains but may not take part or be involved with the credit decisions. Many notable banks operating within the European Union have established or started to establish their own valuation units to be better able to serve their customers and decrease costs associated with valuation services that in many cases have been sourced as external services. This shift has largely gone unnoticed in the academic literature regardless of its importance for the European banking sector and financial markets. Internal valuation must be conducted in accordance with good market practises, on which the most authoritative source being the IVS, which requires that valuations must be conveyed clearly without ambiguity and so that the users understand what is being provided. Proper conveyance or understanding have not been defined in the IVS and can be interpreted differently. This thesis aims at exploring these requirements and comparing them to the requirements of other two major standards, EVS 2016 and RICS Global standard 2017, and creating a framework for testing understanding. The framework was tested with the Finnish valuers of a major Nordic bank. The results were used to analyse IVS compliancy of the internal reporting practise in the case organisation regarding understanding and conveyance. This work also aimed at exploring why IVS compliant valuation reporting does not guarantee that their intended users would use them as could be expected. Frameworks used for similar purposes were not identified during the writing of this work. The result of this work indicate that professional valuers can made different interpretations and conclusion with the internal valuation reports used, when they were given the same information. Improvement areas for framework were also discovered. The organisational reasons prevented collecting answers from the users directly. These reasons are analysed for the needs of the future researchers.Description
Supervisor
Falkenbach, HediThesis advisor
Falkenbach, HeidiHeinonen, Tuomo
Keywords
international valuation standards, understanding, real estate valuation, banking, valuation reporting