Clarification regarding the type of protection value

Question

As regards the different types of protection, could the difference between the market value and the long-term sustainable value be clarified?

In particular, does the long-term sustainable value incorporate aspects of market conditions? When should this value be reported instead of market value for real estate protection items?

Answer

As explained in Section 9.4.5 of Part II of the AnaCredit Reporting Manual, “the attribute ‘type of protection value’ identifies, with reference to an exhaustive list, the type of the reported value of the protection item as reported in the data attribute ‘protection value’”.

In addition, in the case of real estate protection items it is clarified that “… protection in the form of real estate collateral is reported at either its market value or long-term sustainable values, with the market value being the equivalent of the fair value in relation to real estate, while long-term sustainable values are determined in a prudent assessment of real estate taking into account its long-term aspects”.

For the purpose of reporting the AnaCredit attribute ‘type of protection value’, it is therefore important to consider the scope of the appraisal when considering which ‘type of protection value’ to report for real estate protection items.

In particular, the following guidance should be noted:

  • if the appraisal aims to estimate the spot value taking into consideration market conditions, then “market value” is reported
  • on the other hand if the appraisal aims to estimate the market value ignoring cyclical factors, then “long-term sustainable value” is reported
  • ultimately, if the appraisal aims to estimate the value of the protection item without incorporating market conditions (e.g. cost of production), then “other protection value” is reported to AnaCredit as the ‘type of protection value’.

Related questions

See also Baskets of protection and the protection type

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