The innovations were implemented taking into account the updated norms of the current European legislation and the domestic practice of implementing a risk management system by banks. To understand the issue, it is advisable to dwell on the explanations of the National Bank of Ukraine on the results of consideration of letters from the banking community on the application of Regulation №64 set out in the letter to the Independent Association of Banks of Ukraine and the Association of Ukrainian Banks of March 19 this year. (access source: https://nabu.ua/images/uploaded/sys_media_doc/doc_bd2edd764f3392619c19d2aca64aaffa.pdf).
- Regarding the implementation of back-testing of property values
In accordance with sub-clause 4 of clause 177 of chapter 21 of section II of Regulation № 64, control over the valuation of property provides for back-testing of the value of the property. At the same time, paragraph 176 of Chapter 21 of Section I of Regulation № 64 stipulates that the property in respect of which the bank provides control over the assessment is the property that the bank has received / intends to pledge, the property that the bank has acquired / intends to acquire in debt repayment account of the debtor / counterparty.
In view of the above, the bank performs back-testing of the value of the sold property, which was received as collateral, and which, in order to repay the debt of the debtor / counterparty, was recovered in any way provided by contract or law, including by acquiring bank property.
- Regarding the calculation of the allowable amount of deviation of the value of the property, determined by an external or internal appraiser, from the value determined by the results of the verification of the value of such property.
Based on the norm of paragraph 1803 of Chapter 21 of Section II of Regulation № 64, the bank in the internal bank documents on verification of property value independently determines the allowable deviation of property value determined by an external or internal appraiser from the value determined by verification.
- Regarding the property, the value of which needs to be verified
In accordance with paragraph 178 of Chapter 21 of Section II of Regulation № 64, the bank verifies the value of the property determined during the valuation of the property by both external and internal appraisers.
- Regarding the definition of property value verification procedures
In accordance with paragraph 1803 of Chapter 21 of Section II of Regulation № 64, the bank develops internal bank documents on the verification of the value of property, which contain, in particular, valuation procedures for verification of the value of property.
Such procedures are determined by the bank depending on the type of property, the availability of input information on the property, the type of document being analyzed (property valuation report / internal bank valuation report), etc.
Consider the possibilities of IT technologies for the tasks of control over the valuation of property on the example of software "Uvekon" designed to automatically determine the market value of real estate using a geographic information system for collecting, analyzing and visualizing real estate market prices (hereinafter GIS "Uvekon").
Immediately note that, unlike most PCs designed to determine the value of real estate, PC GIS "Uvecon" is not just an automated application of an algorithmic procedure that does not take into account the user's own opinion. PC GIS "Uvecon" gives the user the opportunity for constant dialogue with the PC by selecting the provided PC options information / indicators.
Therefore,
For back-testing the value of the property, which involves comparing the value of each property sold with the value of its last valuation after each such sale, we offer the use of the following online GIS services "Uvecon":
"APPRAISER'S CALCULATOR" - a software tool for automatic calculations of the market value of real estate (https://www.uvecon.ua/ua/kalkulyator-otsinyuvacha.html).
The algorithm of the instrument is completely based on the principles of property valuation standards implemented by the State Property Fund of Ukraine. The work of this service is offered in two formats, namely.
In the semi-automatic mode - "Calculator of the estimator PRO" is carried out directly by the user through the corresponding interface by:
- selection of a sample of objects of comparison from the actual database (offers of sale, rent) on the set factor signs of a segment of the market of the real estate object;
- generation of adjustment indicators for pricing factors;
- automatic coordination of the obtained calculation results,
in automatic mode - "SIMPLE Valuation Calculator", when the value of the property is determined immediately after the introduction of a small set of basic geographical and physical characteristics of the object of study.
It should be noted that, depending on the needs of a particular banking institution, we may offer the Integration of SIMPLE Estimator Calculator tools into any Bank-appropriate software environment through the existing API protocol.
To verify the value of the property in order to determine the allowable deviation from the value of the property, determined by an external or internal appraiser, the following algorithm is proposed, performed by a bank specialist / internal appraiser using the above-mentioned service "Appraiser Calculator PRO":
- selection of objects of comparison from the current database and selection of adjustment indicators for further calculation of market value;
- determination of the value of the object under investigation (verified) by taking into account the selected values of corrective adjustments to the value of objects of comparison and the size (percentage) of deviation from the value of property determined by an external or internal appraiser.
I would like to draw your attention to the fact that the Uvecon GIS PC is designed for a typical user who does not have deep professional knowledge in the field of software, but at the same time has a special level of knowledge that allows to objectively evaluate the results. The PC has built-in protection against incorrect user actions, indicating incorrect actions and possible ways to correct the error.
In particular, I consider it necessary to clarify the criteria for external statistical databases that the bank has the right to use when performing automatic verification of the value of property to assess homogeneous groups of property.
In accordance with paragraph 179 of Chapter 21 of Section II of Regulation № 64, the criteria for external statistical databases that a bank has the right to use when automatically verifying the value of property to assess homogeneous groups of property are: the bank has a reasonable judgment that the statistics bases are sufficient to verify the market value of homogeneous property groups; statistical databases are regularly updated and available for permanent use by the bank.
Therefore, the Uvecon GIS database fully meets these requirements, because:
- in automatic mode and periodically - once a month the geospatial database is formed and updated by downloading information about the physical geographical and price characteristics of real estate from more than 130 sites of real estate agencies. Thus, every month the system is replenished with more than 500 thousand ads for the sale or lease of real estate in all its segments, types, classes and dimensions;
- automatic cleaning of unreliable information ("statistical noise"), geocoding of the sample and distribution of data by segments, types and classes of real estate, grouping of objects by area is provided;
- automatic entry of objects on the geoportal map and, accordingly, connection to pricing zones is provided (https://www.uvecon.ua/ua/geoportal.html).
In general, the capacity of the Uvecon GIS database and its dynamism allow the Bank’s specialists to carry out any applied professional tasks of real estate appraisal, as well as tools for analysis and monitoring of the real estate market of Ukraine. Below I will give a brief description of our programs, because more information is provided on the site "Uvekon.
"PORTFOLIO ASSESSMENT OF REAL ESTATE" is a service of automatic and with any periodicity determination of the range of probable market selling prices for an array of real estate objects.
This service is based on the use of a software tool to automatically determine the price parameters of an array of real estate on a discrete date in retrospect or the current period. Data processing is carried out by uploading them to GIS "Uvekon", further automatic geocoding of each real estate object and calculation of actual value of objects on the basis of their technical characteristics and territorial location https://www.uvecon.ua/ua/avtomatichne-viznachennya-virogidnoyi-rinkovoyi-vartosti.html.
ARM ANALYTICS FOR WORKING WITH THE GIS UVECON DATABASE - a set of tools, filters, descriptions which through the WEB interface of the Uvecon site provide direct access to the database and analytical work with it (https://www.uvecon.ua/en/ arm-analytics.html).
INTERACTIVE REPORT “STATE OF THE REAL ESTATE MARKET OF UKRAINE ACCORDING TO GIS“ UVEKON” is an online tool of end-to-end analytics for obtaining any information on the state of the real estate market of Ukraine in all its segments, objects, capitalization rates, etc. for quick decision-making (https://www.uvecon.ua/ua/interaktivniy-zvit-rinok-neruhomosti-ukrayini.html).
Thus, the capabilities of IT technologies for property value verification tasks demonstrate the undeniable advantages of a PC compared to performing tasks in "manual" mode.
In conclusion, I would like to note that the company's specialists have prepared draft documents to support the property verification procedure, in particular, options for verification conclusions and protocols based on the results of determining the deviation of the value of the surveyed real estate.