A Vision for Real Estate Finance in the UK
With the encouragement of the Bank of England, the Real Estate Finance Group set out in 2012 to develop a set of coherent, informed and strategic recommendations for the operation and regulation of the UK CRE finance market with a view to protecting financial stability. The members of the Real Estate Finance Group included Peter Cosmetatos, who subsequently became chief executive of CREFC Europe.
After the October 2013 publication of that group’s draft recommendations for industry consultation, CREFC Europe formed a working group chaired by Mark Nichol, Bank of America Merrill Lynch, to prepare a (essentially supportive) response.
In May 2014, the Real Estate Finance Group published its final report, A Vision for Real Estate Finance in the UK, and the project is now being taken forward under the umbrella of the Debt Group of the UK’s Property Industry Alliance (PIA). CREFC Europe is part of the PIA and is involved in that process, so our voice will continue to be heard.
Long-term value methodologies (Recommendation 4)
In June 2017, a report was published setting out the results of research into alternative long-term value methodologies – a key milestone in taking forward recommendation 4 of the original Vision report. The focus of this work was on developing a metric that can help lending institutions and indeed their regulators better manage property cycle (or vintage) risk. Further research on that topic has been commissioned through the Investment Property Forum Research Programme.
Loan database (Recommendation 1)
Since the second half of 2017, a new working group led by Paul Coates, now at CBRE, has been developing proposals for implementation of recommendation 1 of the Vision report. Its goal is the creation of a loan-level data repository capable of providing far better CRE finance market information (both snapshot and over the cycle) than is currently available, while respecting confidentiality and the anonymity of individual transactions and transaction parties.
We understand that the Bank of England progressed its plans for a CRE loan database in late 2020 as part of its broader data transformation strategy. Apparently, following an investigation of the technical feasibility of the proposal, the Bank is now at the stage where it can start engaging the industry more broadly again (something that we anticipate with interest).
Education of CRE lenders (Recommendation 3)
A third workstream, led by Sue Forster of the Investment Property Forum, is seeking to take forward recommendation 3 of the Vision report. Here, the aim is to develop a framework outlining the knowledge and training that CRE lending professionals, and those with responsibility for capital allocation at the firm level, should have.
If you would like to know more about the Vision project or to be involved in influencing how particular recommendations are taken forward, please contact Peter.