Valuation of Movable Property Collateral

Definition

Valuation of Movable Property Collateral concerns the methodologies used to perform Collateral Valuation for various movable assets (vehicles, equipment) in the context of it being used as Collateral in secured lending.

NB: The term movable property collateral is open-ended to include all collateral that is not immovable real estate which traditionally is valued separately.

EBA Requirements

At the point of origination, institutions should ensure that the value of all movable property collateral is assessed through an appropriate and prudent approach that is proportionate to the nature, type and complexity of the collateral, by an internal or external valuer, appropriate advanced statistical models meeting the conditions set out in Section 7.4 or other standard methods, such as indexation, taking into account the market value as referred to in Article 229(3) of Regulation (EU) No 575/201

When applicable, institutions should set out, in their policies and procedures, approaches for the purposes of this valuation, and specify internal thresholds and limits that require an individual valuation of movable property collateral at the point of origination to be performed by a valuer.

When institutions use external valuers, they should establish a panel (selection) of accepted external valuers, covering specific property that is being used as collateral, that is relevant to the lending activities of the institution as well as the location of these activities. This panel of experts should be used for the valuation of large and complex movable property collateral, such as vessels, aircraft and plant machinery.

For movable property collateral that is subject to an individual valuation by a valuer, institutions should ensure that they have obtained a clear and transparent valuation report documenting all elements and parameters that determine the value of collateral, as outlined in paragraph 213.

For movable property subject to a valuation by statistical models, institutions should ensure that they have obtained a clear and transparent model outcome, specifying the value of the collateral. Institutions should understand the methodologies, key parameters, assumptions and limitations of the models used.

Institutions should have adequate IT processes, systems and capabilities in place and sufficient and accurate data for the purposes of any statistical model-based valuation.

See Also

• EBA Guidelines on Loan Origination and Monitoring