Bank lending valuations

1. Bank lending valuations and mortgage lending value

RICS professional standard, Europe, 2nd edition

This updated professional standard, effective from 1 January 2026, is essential for RICS members providing valuation services for bank lending purposes in or subject to EU jurisdictions. It also serves as a valuable resource for borrowers, lenders and regulatory authorities to better understand the evolving valuation landscape.

The second edition of this standard has been revised to reflect significant regulatory changes, particularly the new Basel 3.1 guidance and the EU's Capital Requirements Regulation (CRR III). These updates introduce ‘prudently conservative valuation criteria’, which will have a major impact on how property valuations are conducted for secured lending.

Key aspects covered

The standard comprehensively covers:

• Market valuation: It clarifies the role of market value as the primary basis for bank lending valuations and its relationship to the new Basel 3.1 criteria.
• Mortgage lending value (MLV): The standard addresses the evolving role of MLV, noting its continued use for covered bonds in certain jurisdictions. It also provides a detailed overview of established MLV practices in countries like Germany and Spain.
• The RICS valuer's role: It outlines the responsibilities of RICS members in MLV valuations, emphasising the need to explicitly state the valuation basis and methodology and to differentiate MLV from market value.
   

This professional standard, alongside the related new global RICS practice information on Basel 3.1, Bank lending valuations: Basel 3.1 prudently conservative valuation criteria adjustments, 1st edition, ensures RICS members are equipped with the latest information to navigate the complexities of European bank lending valuations.

2. Bank lending valuations: Basel 3.1 prudently conservative valuation criteria adjustments

RICS practice information, global, 1st edition

This new practice information is a vital resource for RICS members providing valuation services for bank lending purposes globally. It is designed to assist professionals, lenders and regulators in understanding the implications of the Basel 3.1 prudently conservative valuation criteria for their work.

Addressing how these new global criteria might impact bank lending valuations, it supplements the RICS professional standard Bank lending valuations and mortgage lending value, Europe, 2nd edition, which focuses specifically on the European context.

Key aspects covered

The document clarifies the key concepts and criteria for valuation in a post-global financial crisis (GFC) environment, including:

• Market value: It reaffirms market value as the primary basis for valuations while addressing its limitations as the sole measure for secured lending.
• Long-term value: It explains the concept of long-term value, including its most well-known form, mortgage lending value (MLV). The document highlights the key difference between these models and market value.
• Basel 3.1 criteria: The practice information provides a detailed breakdown of the new Basel 3.1 criteria, including the requirement that a valuation must not exceed market value and that adjustments should be made to account for prices that may be ‘significantly above the value that would be sustainable over the life of the loan’.
   

This document acknowledges that the implementation of these criteria is variable across different jurisdictions. It recommends that valuers identify how their specific jurisdiction has implemented and interpreted the Basel 3.1 guidance before accepting an instruction.

This practice information is part of RICS' commitment to providing up-to-date, relevant guidance to help members navigate the evolving global financial landscape.