I. THE VALUATION
I.1 Regulatory Framework
| a) Is there a legal framework in your Member State for the valuation of real estate for lending purposes (loan origination)? If yes: • Is this framework specifically for the valuation of real estate for lending purposes or are provisions enshrined in a broader piece of legislation? • Is it limited to the transposition of European or International Standards or is it broader in nature? • Please provide references and indicate whether it applies to both residential and commercial property. If there are differences between both property types, please explain. |
There is no specific regulation on valuation. However, if the loans are to be used as assets in the covered pool the collateral for the loans must have been valued in line with the rules in the Swedish regulation for covered bonds. There are other regulations to comply with such as EBA loan origination and monitoring and CRR, Basel 3. |
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| b) If there is no specific legal framework, is the valuation of real estate for lending purposes covered by other means, e.g. self-regulation, sector recommendations or supervisory guidance? | Finance Sweden has developed two set of standards for valuation, one for commercial properties and one for owner-occupied residential properties. There are other organizations which handle authorisations of valuers, and which put together standards and guidelines for valuers. |
| c) Do national valuation standards exist? Is there any cross-reference to European and/or International Valuation Standards (EVS/IVS)? | The national standards that exist are private, see 1.1 (b). They do not refer to any international standards. Many valuers of commercial property are authorised by valuer organisations and must follow the requirements set by those organisations and members of estate agents organisations must apply the rules set by those organisations |
| d) How has the regulator in your Member State transposed Article 19(1) of the MCD regarding “reliable standards” for the valuation of residential property (into legislation or delivered through a professional body)? Indicate whether and how “reliable standards” are defined and whether and how the content of those standards are prescribed. | The government was of the opinion that the valuations already follow reliable standards so the directive’s requirements have simply been added to implementing law (SFS 2016:1024, Link: https://rkrattsbaser.gov.se/sfst?bet=2016:1024) and to the Swedish FSA’s regulation (FFFS 2016:29, Link: FFFS201629.pdf) as in the directive. |
I.2 Valuation Bases & Methodology
| a) What valuation bases (Market Value, Mortgage Lending Value, etc.) are typically used in your Member State for the valuation of property for lending purposes (please disregard at this stage the specific requirements of Art. 229 CRR considering that the Property Value is not an independent basis of value). | Market value for lending purposes. |
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| b) Based on what definition? Please provide the definition and reference to where it can be located. | The definition of "market value" has become institutionalised by the International Valuation Standards Council ("IVSC") and the Royal Institution of Chartered Surveyors ("RICS"). For the IVSC “market value” means “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. "The market value shall be documented in a transparent and clear manner". The IVSC make it clear that a “willing seller” in that context is simply a seller motivated to sell at the best price obtainable on the valuation date. |
| c) In case other valuation bases are used in your Member State for the valuation of property for lending purposes, please specify the effect, if any, on the final valuation. | |
| d) Depending on the valuation base used, which valuation approaches or methods (comparison, income, cost, etc.) are typically applied in your Member State to value properties for lending purposes in each category? | Please refer to 1.2 (b). Private homes are commonly valued by using values of comparable houses. Multifamily houses and commercial properties are valued through capitalization and cash flow models. |
I.3 Valuation Report: Form & Content
| a) Does the legal or professional framework in your Member State specific to the valuation of properties provide minimum requirements in terms of the form and content of the valuation report? If yes, please indicate what these minimum requirements are. | No legal requirements are specified. The professional framework of the valuer organisation “Samhällsbyggarna” has a rather general framework, with general principles such as independence of the valuer, and some formal requirements on the valuations. The latter is rather basic, such as name of property, date of valuation and so on. There is a general recommendation to follow the standards set by Finance Sweden (see 1.3.c). These standards are more detailed. |
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| b) Should the form and content of valuation reports be prescribed, are there differences between residential and non-residential properties? Please describe as appropriate. | There are two standards set by Finance Sweden (see 1.1.b) |
| c) If the form or content of the valuation report are not prescribed, what form does the valuation report typically take? Please specify differences between residential and commercial property valuation reports. | Finance Sweden has developed standards cover the following areas: definition of the task, background information, presumptions for the object and a judgement of the Market Value. |
I.4 Technology & Valuation
| a) Does the legal or professional framework in your Member State provide specific rules/guidance on the use of digital valuation tools (AVMs, Artificial Intelligence etc.)? If yes, what does this consist of and is it restricted to a particular type of property? Please specify whether there is a correlation with the requirements of Article 208(3a) CRR and of section 7.4 of GLOAM or whether the latter provisions are of stand-alone application in your Member State. | No, there are no specific rules regarding digital valuation tools. AVMs are typically only used for private homes. Banks have internal rules on when and where to use such tools. |
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| b) For what purpose are digital tools and/or AI employed in your Member State? - Mortgage origination, monitoring and review of property values, revaluation etc. - Capital requirements, covered bond funding, securitisation transactions, mortgage portfolio risk management etc. |
Digital tools are used for both purposes. |
| c) Scope of digitisation: Please determine the scope of automated and digitised tools in your Member State. Are they confined to data collection, do they deliver reliable property values or are they even used to produce full or partial valuation reports including description of locations, infrastructure, building characteristics etc.? If the latter is the case, is internal data used or it is permitted to purchase data from an external data provider? | Automated and digitised tools provide both point estimates and an estimate of the reliability of the point estimate. If the reliability is good enough the point estimate can be used as a basis for valuation. Automated and digitised tools can use data for other providers than the bank, for example the transaction price for all houses are publicly available and of course used in such models. |
| d) Quality requirements: How are the reliability of the tools and their outputs assessed, e.g. by controlling the inputs, back-testing, supervision and/or plausibility checks by valuers etc.? | The tools are back-tested against transaction prices. Individual banks can also do additional quality controls, but those differs between banks. |
| e) Do you foresee an increase in the use of automation and digitisation of property valuation processes in the future? Please describe potential technological developments which could impact the valuation profession and accelerate its transformation, notably through the use of AI. | Yes, it will increase depending on the need of portfolio valuation and the future development of digital lending products. |
I.5 ESG, climate risk, transformation risk
| a) How are ESG factors and climate risk taken into consideration in the valuation process? Do Market Values and/or Mortgage Lending Values reflect the ESG characteristics of properties? | Adjustments for ESG factors and climate risk is determined by the valuer on a single property by property basis when relevant. By construction ESG factors and climate risks that are reflected in the input data from comparable sales information is included in the value. |
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| b) Are there rules in your Member State requiring assessment of EU Taxonomy alignment of a property in the valuation report and the subsequent impact of compliance/non-compliance on property values? | No |
| c) Are digitised tools and AI applied in order to capture and/or measure the impact of ESG factors and climate risk on property values? | Yes |
I.6 Market Initiatives
| a) Please describe any market initiatives which have been undertaken in your Member State (including cross border initiatives) and which have promoted market best practices and/or transparency of valuation practices. |
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II. THE VALUER
II.1 Regulatory Framework
| a) Is property valuation a regulated profession in your Member State (through legal, regulatory or statutory rules)? | No |
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| b) Is the use of the title of valuer protected in your Member State? If yes, by whom? | No |
| c) If the title of valuer is not protected in your Member State, how do lenders ensure that they work with ‘qualified’ valuers? Are there ‘professional’ certifications for property valuers in your Member State? If yes, please name them. | Individual banks can also do quality controls, but those differs between banks. Many banks require membership in valuer organisations or estate agents’ organisations. There are different forms of certifications such as “Valuer authorized by Samhällsbyggarna” and “Valuer certified by Members of the Royal Institution of Chartered Surveyors (MRICS) |
| d) Is the regulatory or professional framework the same for all valuers, whether they value residential and/or commercial property? Or are there differences? Please describe as appropriate. | There are different authorisations for residential and commercial property, as well as special authorisations for specific property types, such as agricultural properties. |
II.2 Qualification and Independence
| a) The qualified valuer • How has the regulator in your Member State transposed the requirements of Article 19(2) of the MCD, of Articles 229(1) and 208(3b) of the CRR regarding the instruction of “professionally competent valuers” or valuers who possess the “necessary qualifications, ability and experience” (transposition through legislation or by self-regulation)? Indicate how professional competence and qualification requirements are prescribed. |
This is implemented by law (SFS 2016:1024) and regulations (FFFS 2016:29). The term is not defined in any specific way. EBA guidelines are applicable in Sweden. |
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| a) The qualified valuer • If professional competence, qualification, ability and experience requirements are not prescribed, what is general practice with regard to professional qualifications? |
It differs between banks but it is prescribed with internal regulations. EBA guidelines are applicable in Sweden. |
| b) The independent valuer • How has the regulator in your Member State transposed the provision in Article 19(2) of the MCD or in Articles 229(1) and 208(3)(b) of the CRR regarding “sufficient independence from the credit underwriting process” or “independence from the loan processing and loan decision process” (through legislation or delivered through self-regulation)? Indicate whether and how the requirement is defined and whether and how it is prescribed. |
Sufficient independence from the credit underwriting process” is defined in law, which states that the individual doing the valuation should be independent of the credit risk assessment. |
| b) The independent valuer • If “sufficient independence” is not prescribed, what is general practice to ensure the valuer is unbiased and not subject to undue pressure? |
Not applicable. See above. |
II.3 External vs. Internal
| a) Does the legal or professional framework in your Member State specific to the valuation of property for lending purposes lay down rules for banks and lenders as to whom they may use to value properties? • If yes, do credit institutions have the possibility to employ both internal and external valuers? • Is one type of valuer typically employed more frequently than the other? |
Valuers need to be sufficiently competent and independent Yes. It differs between banks |
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| b) If there is/are no legislation/rules regarding the use of external and internal valuers, what is typical practice? | It differs between banks. |
II.4 Professional Indemnity Insurance
| a) Does the legal or professional framework in your Member State specific to the valuation of property for lending purposes require: • Valuers to have professional indemnity insurance cover? • Lenders to use only valuers covered by professional indemnity insurance? |
Yes, valuers authorised by the Royal Institution of Chartered Surveyors (RICS) and Samhällsbyggarna. No |
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| b) If there are no such requirements, how are lenders/valuers covered for the risk? • Is/are there legislation/rules in your Member State determining the responsibility of the valuer vis-à-vis his client? If yes, please describe the legislation/rules and the responsibility of the valuer. |
Not applicable. |
III. VALUATION & CAPITAL REQUIREMENT
| a) Property Value How are the Property Value requirements of Article 229(1) CRR transposed in your Member State: • by calculating the Mortgage Lending Value • by Market Value adjustments ◦ adjustments determined by the valuer on a single property by property basis ◦ adjustments determined by the credit institution on a portfolio level based on internal historic market data series ◦ adjustments determined by the credit institution on a portfolio level based on data provided by external research institutes or data providers |
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| b) Monitoring of property values Has the regulator in your Member State laid down criteria regarding "more frequent monitoring where the market is subject to significant changes in conditions"? |
No |
| b) Monitoring of property values Has the regulator in your Member State laid down criteria regarding “advanced statistical or other mathematical methods” complying with the technical requirements of Article 208(3a) CRR? |
No. Each lender has to explain and describe the model for the regulator. The regulator has the mandate to approve or decline the statistical method. |
| b) Monitoring of property values Please provide an overview of the different statistical methods/tools complying with Article 208(3a) CRR applied by lenders in practice. |
In practice, commercial property price indices purchased on a regular basis from an external valuation company are used to monitor the last Market Value. These new indexed market valuations are then used for monitoring the development of LTV-ratios for example. For residential retail properties are AVM used as a general valuation method to monitor the last value. |
| c) Review of property values and revaluation • Has the regulator in your Member State laid down criteria which define “review” of the property valuation? If so, what are the minimum and maximum periods within which a review must be conducted? Based on which criteria? |
No criteria, except in the rules for covered bonds requiring regularly. |
| c) Review of property values and revaluation • Has the regulator in your Member State laid down criteria which define “material decline relative to general market prices”? How are ESG-related considerations assessed as an indicator for a material decline? |
No, not really. A decline by 15 percent has been mentioned but it is not explicitly mentioned in regulations. Adjustments are determined by the valuer on a single property by property basis, when relevant. |
| c) Review of property values and revaluation • Please provide a description of how ‘reviews’ are carried out in your Member State, e.g. by a new full-size valuation report, a desk-top valuation, a valuation certificate, a plausibility assessment or alike. What criteria are used to determine how the reviews are to be carried out? |
Full-size valuation or desk-top valuation. The monitoring process will make it possible to understand if a review needs to be done. |
| c) Review of property values and revaluation • For the calculation of average values in accordance with Article 229 (1)(e) CRR in the context of upward revisions of values, are there any guidelines from regulators or lenders addressing the data points to be used and the comparability of properties? Please indicate whether there are requirements from regulators or lenders for ‘sufficient data’ and ‘unequivocal increases of value’. |
There are no guidelines published yet. Currently, there are no explicit requirements published by regulators or lenders; however, such requirements may be introduced in the future. |
IV. VALUATION OF THE COVER POOL
| a) Are valuation rules for cover assets provided at national level in accordance with Article 6(5a) CBD? Are they provided by national covered bond legislation or by professional guidance/standards? | CBD is incorporated in the national law and so is article 6(5). |
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| b) What valuation bases apply for the valuation of cover assets (Market Value, Mortgage Lending Value)? | Market Value. |
| c) In the case of Market Value valuations, are there any prudential or longer term/sustainable features of the property to be considered? If yes, to what extend? | The market valuation shall, by definition, be set as a long-term reliable value. This means that temporary undue fluctuations in a property market and speculative elements must be disregarded. |
| d) How is the requirement that the valuation shall be carried out by a valuer who possesses the necessary qualifications, ability and experience transposed in your Member State (Article 6(5b) CBD)? Are there specific qualification requirements for valuers? | The valuer must by covered bond law be sufficiently competent and independent. It is the same requirements as for normal mortgage lending. |
| e) How is the requirement that the valuer shall be independent from the credit decision process transposed in your Member State (Article 6(5c) CBD)? | For an asset to be eligible as a covered asset it must, among other rules, be in line with the requirements in CRR article 129(3), which refer to CRR article 208 that incorporates the requirements of the valuer’s independence. |
| f) Are there differences in valuation rules and/or qualification requirements with regard to the property type (residential vs. commercial properties) or to the loan amount? | No |
| g) Are there specific monitoring, review and revaluation requirements for cover pool assets at national level (see Article 129(3) CRR referring to Article 208 CRR)? | No |
| h) Do regulators of your Member State provide a waiver from the limitation of calculating average values for cover assets in case of upward revision of values (Article 129(3) second subpar. CRR)? | Yes |
V. OTHER
REGULATORY HARMONISATION AND NATIONAL DIVERGENCES
| 1. What challenges does your Member State face in harmonising with EU regulations (e.g. legal, technical, market-related)? | All standards and regulations always need to be nationalised and interpreted locally. Sometimes will national legislation or regulations have other meanings but normally will it be compliant to EU regulations after some adjustments. Every country has specific conditions and prerequisites which can be complicate to adapt to the regulation. |
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DATA QUALITY, TRANSPARENCY AND COMPARABILITY
| a) What data sources are typically used by valuers in your Member State, and to what extent do they comply with Article 208(3a) of the CRR? | Data is to a large extent sourced from public registers. Banks must show compliance to 208 (a) on an individual basis. |
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| b) What measures have been taken to improve transparency and comparability of valuation data within your Member State? | N/A |
| c) Is there a central database or platform for sharing valuation data in your Member State? | No |
EDUCATION, TALENT PIPELINE AND PROFESSIONAL DEVELOPMENT
| a) What training programs or continuing education opportunities are available for property valuers in your Member State? | None particular but there are several different types of professional courses supported by Samhällsbyggarna and RICS. |
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| b) Is there collaboration between universities, professional bodies, and regulators to ensure a sustainable pipeline of qualified valuers? | Yes there are a combination of different educations and courses to ensure the pipeline of qualified valuers. |
| c) How does the EU regulatory environment influence the development and attractiveness of the valuation profession? | In a negative way. |
FUTURE TECHNOLOGICAL AND REGULATORY DIRECTIONS
| 1. What technological developments are expected to impact valuation processes in your Member State over the next five years? | All technologies such as Artificiell Intilligence will affect the processes to perform property valuations. It will be a continued technical development towards simplifications and improved valuation models. Different databases for property information and property valuation will enable further possibilities and quality assurance. |
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