Revaluation of Movable Property Collateral

From Open Risk Manual

Definition

Revaluation of Movable Property Collateral refers to the practice of monitoring and revaluing Collateral that has been pledged to secure a loan as a means of having an up-to-date perception of the residual Credit Risk

EBA Requirements[1]

For the monitoring of movable property collateral, institutions may rely on appropriate statistical models and indices. For the revaluation of movable property collateral, institutions may rely on assessment by valuers, statistical models and indices.

Institutions should, in their policies and procedures, set out approaches to using a valuer or statistical models, define the approach (e.g. desktop valuation, drive-by valuation, internal and external assessment of the property) that is most suitable for the specific type of collateral for the revaluations done by the valuers, and set out the frequency of monitoring and revaluation of movable property collateral.

Institutions’ policies and procedures should include, when applicable, criteria for individual monitoring of the value and revaluation of the movable property collateral by a valuer who possesses the necessary qualifications, ability and experience. Proportionate to the type, nature and complexity of the movable property collateral, such as aircraft, shipping, physical plant and machinery, these criteria should be related, at least, to the value of the movable property collateral during the origination phase, the lifespan, the condition of tangible assets, such as depreciation and maintenance, the necessity of physical inspection and certification. 230. Institutions should have adequate IT processes, systems, capabilities and sufficient data for the purposes of any statistical model-based or index-based revaluation.

See Also

References

  1. EBA, Guidelines on loan origination and monitoring EBA/GL/2020/06