Central bank to reevaluate homes held by banks

By TPN/Lusa, in News · 07-10-2013 10:35:00 · 1 Comments
Central bank to reevaluate homes held by banks

The Bank of Portugal (BdP) is threatening to cut 15% to 60% of the value of properties banks are holding if they do not evaluate them according to central bank rules.

According to a circular from mid-September, the BdP is concerned with bank exposure to the real estate sector after finding that the value the banks have given to properties that have had to take back as the loans were not being paid was not “sufficiently prudent”.

So way the central bank is now making the banks revaluate all the properties given back that they are holding, which have not been revaluated for more than a year.

The revaluations have to be done by external specialists and no specialist can do more than 20% of the valuations.

The BdP also said that there had to be a physical visit to the site.

Lastly, if the guidelines were not followed, the BdP would devalue the properties by between 15 and 60% according to a specific table.

For instance, a property that was evaluated more than three years ago and it is not even 50% would have a 'haircut' of 60%.

The real estate revaluations (either made by the banks under the BdP guidelines, or imposed) are going to have a negative impact on bank’s accounts, since tighter rules should increase impairments (loses) and slash financial profits, in a year when banks have been accumulating losses.


This is right up there with paying employees to work 14 out of 12 months a year. It seems its so deep here new surprises will never cease.

by Flash Flood from Lisbon on 07-10-2013 08:38:00
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