RICS updates global guidance on bank lending valuations with two key publications

The Royal Institution of Chartered Surveyors (RICS) has released two crucial updates providing clarity and guidance for valuers, lenders and regulators involved in bank lending valuations across Europe and worldwide.

The newly published Bank lending valuations and mortgage lending value, 2nd edition Professional Standard (Europe) and Bank lending valuations: Basel 3.1 prudently conservative valuation criteria adjustments, 1st edition Practice Information (Global) reflect the far-reaching regulatory changes introduced by the Basel Committee on Banking Supervision under the revised Basel 3.1 framework.

Together, these two complementary publications address the evolving relationship between market value, mortgage lending value (MLV) and the newly introduced prudently conservative valuation criteria set out under Basel 3.1 and implemented in the EU through the amended Capital Requirements Regulation (CRR III).

The second edition of the standard provides updated professional guidance for RICS members offering valuation services for mortgage lending within or subject to EU jurisdictions. It integrates the latest Basel 3.1 criteria into the MLV framework and clarifies its ongoing use, specifically its mandatory and persistent role in European covered bond markets.. The standard reaffirms that, while market value remains the most widely applied basis for secured lending, MLV continues to be an essential reference point and long-term, sustainable value measure required by national regulators within key segments of Europe’s financial and regulatory landscape.

In parallel, the practice information addresses the wider global implementation of Basel 3.1. It explores how valuers should interpret and, where appropriate, apply the new prudently conservative valuation criteria. The document also clarifies the valuer’s role under differing national regulatory frameworks and highlights the need for consistent, research-based adjustment models to identify when property prices may deviate from long-term sustainable levels. This Practice Information has been issued as guidance rather than instruction to reflect the variable and evolving nature of Basel 3.1 implementation across different jurisdictions.

Both documents are the result of extensive collaboration between RICS, leading academics, valuation professionals and banking sector experts. Professor Neil Crosby of the University of Reading led the update, supported by an international expert group representing CBRE, Colliers, JLL, EMF-ECBC, and other major industry bodies.

RICS Professional Practice Lead Jonathan Fothergill FRICS said:

“The property market is central to the global financial system. The regulatory landscape for bank lending valuations is changing rapidly and is globally fragmented. As global economies grapple with inflation and interest rate shifts, the need for reliable, sustainable property valuations in response to through- the-cycle lending practises has never been more critical. These two RICS publications cut through the complexity, giving valuation professionals and the financial sector the essential clarity needed to implement the Basel 3.1 framework responsibly in those jurisdictions where real estate valuations for lending purposes are impacted. They affirm our commitment to seeking global consistency in valuation while providing the essential tools to make prudently conservative adjustments.”

Key updates include:

• Full alignment with Basel 3.1 and the EU’s amended CRR III (2024)
• Clarification of the distinction and relationship between market value, mortgage lending value (MLV) and prudently conservative valuation criteria
• Practical guidance on long-term sustainable valuation approaches, including through-the-cycle modelling to counter the pro-cyclical nature of market value
• Recognition of national variations in the adoption and interpretation of Basel 3.1 and MLV frameworks
• Professional integrity: reinforcement of valuer competence, independence and professional responsibility under RICS’ Red Book Global Standards
   

The Practice Information document is effective straight away, the Professional Standard will take effect from 1 January 2026, providing valuers and financial institutions time to review and integrate the new guidance into their practices.

-ENDS-

Editor’s Notes:

The Standard document may be downloaded at this link, whilst the Practice Information may be found here.

About RICS

We are RICS. Everything we do is designed to effect positive change in the built and natural environments. Through our respected global standards, leading professional progression and our trusted data and insight, we promote and enforce the highest professional standards in the development and management of land, real estate, construction and infrastructure.

Our work with others provides a foundation for confident markets, pioneers better places to live and work and is a force for positive social impact.

For more information:

Kris Hicks
Khicks@rics.org

press@rics.org