Property Industry welcomes the Bank of England’s decision to work with the UK finance industry to improve the resilience of the sector
Speaking at the Guildhall in London on 19th October, Alex Brazier – Executive Director, Financial Stability Strategy and Risk, and a member of the Bank of England’s Financial Policy Committee – outlined the Bank’s support for key proposals put forward by the Commercial Real Estate (CRE) finance industry, through the Real Estate Finance Group, a cross-industry group of senior real estate professionals, in its Vision for Real Estate Finance in the UK report.
The Property Industry Alliance (PIA) Debt Group, co-chaired by Kames Capital’s Phil Clark and Aviva Investors’ John Gellatly, perceives this as a critically important speech as it clearly demonstrates the industry and regulator working together in a considered and collaborative manner on two of those proposals: the creation of a CRE loan database, and the use of a long-term value metric to strengthen risk analysis. The intention to create mechanisms and processes to reduce future risks and dampen volatility across the real estate and banking sectors.
The PIA debt group believes implementation of these mechanisms will decisively increase the resilience of the banking sector through future cycles and make ITS relationship with the UK property market more sustainable.
The PIA Debt Group is now actively working to implement the proposals and is initially focusing on three of the recommendations from the Vision report:
- Create a UK CRE loan database
– This work stream will be led by Richard Dakin, CBRE
- Regulatory capital requirements for lenders should be linked to the long term value of the mortgaged property rather than its current market value
– This work stream will be led by Rupert Clarke, Lipton Rogers
- All individuals involved in CRE lending should have a CRE qualification
– This work stream will be led by Andy Rothery, Former Head of Deloitte Real Estate
Commenting on the Bank of England’s decision, Phil Clark, Head of Property Investment at Kames Capital and co-chair of the PIA Debt Group said: “We very much welcome the Bank of England’s support for the proposals put forward through the Vision for Real Estate Finance in the UK report, led by Nick Scarles; the culmination of eight year’s work by the industry. I look forward to working with John, the rest of the group, the wider industry and regulators in implementing the recommendations, which will have huge benefits for the resilience of the UK commercial property industry.”
John Gellatly, Head of EMEA, Global Indirect Real Estate at Aviva Investors and co-chair of the PIA Debt Group said: “We are delighted that the Bank of England has confirmed its support for measures outlined in the Vision for Real Estate Finance in the UK report and I am excited to be part of the team driving the recommendations forward.”
Peter Cosmetatos, chief executive of CREFC Europe and principal author of A Vision for Real Estate Finance on behalf of the Real Estate Finance Group, is providing secretariat services to the PIA Debt Group, and said: “These Vision recommendations have prompted a great deal of discussion in the UK commercial real estate finance industry over the last couple of years. Alex Brazier’s speech is a clear signal that it is now time for enthusiasts and sceptics alike to join the conversation so these proposals are implemented in a way that is as beneficial as possible for the industry.”