Identification of possible future losses on real-estate-backed loans, in compliance with the new IFRS 9 financial reporting standard, ECB regulations and the Bank of Italy’s Circular 285. This is the purpose of PREMIUM, the brand new property risk analysis platform for institutional lenders and their Credit Risk Officers, presented today by Prelios Valuations.
“Premium is the first in a series of projects we shall be presenting to the market over the coming months,” said Giampaolo Corsini, CEO of Prelios Valuations, a company in the Prelios Group and a leading Italian property valuation specialist. “The experience and all-round operational expertise we offer to support the market and real estate collateral, together with our strategic focus on innovation, give us an absolute front-line positioning to guide the current changes in the services sector.”
Premium combines Prelios Valuations’ experience in statistical property revaluation with socio-economic big data, to produce innovative short- and medium-term risk analyses of individual assets or complete property portfolios.
The new tool was presented today at the event Will Real Estate Big Data Help Mitigate Risks? organized in Milan by Deloitte at its Greenhouse. Giampaolo Corsini added: “Thanks to more than thirty years of experience as a provider of services addressing every area of the property market, and our data warehouse storage, Prelios today offers a unique legacy in terms of knowledge and of the breadth and heterogeneity of the information at our disposal.”
The Prelios Valuations Premium platform enables banks, investors, insurers and real estate managers to broaden their understanding of trends on the property market, by moving from observation based on prices and transactions to a vision embracing the entire spectrum of macro and micro economic, social and demographic conditions.
“Profit margins on mortgage loans are extremely tight at the moment, capital requirements are at record highs and compliance is particularly focused on NPLs and provisions,” said Luke Brucato, head of business development at Prelios Valuations. “The Premium platform gives risk managers a complete vision, using asset-by-asset analysis to provide early warning of any signs that could suggest a future change in value.”
Through their Credit Risk Officers, institutional lenders need not only to review property guarantees over time, they also have to comply with the regulatory requirements of the ECB and, within Italy, with the Bank of Italy’s Circular 285. The ultimate objective is to help banks allocate regulatory capital correctly and identify possible future losses on real-estate-backed loans, in compliance with the new accounting standards. “Thanks to the depth of our time series and forecasting models, Premium enables users to identify the most probable future value, asset by asset, and also ensure compliance with the latest IFRS 9 developments,” Luke Brucato said today.
The innovative big data analytics tool for valuing property assets and guarantees was developed by Prelios Valuations in collaboration with BRaVE m&t (a spin-off of the Politecnico di Milano), Microsoft, Consodata and Agic Technology.
Premium provides three important elements for banking risk management, to deliver innovative support in achieving a strategic vision of risk and procedures:
- the Risk Index to calculate the probability of loss of value over the short term;
- the Predictive Market Value for calculation of future market value over the medium and long term, in order to determine the IFRS lifetime expected loss;
- the Judicial Value to calculate the most likely award price in an auction.
“For the Prelios Group's services companies, the combination of our in-house data query and processing capabilities with the strategic collaboration of partners of this standing creates a smooth and stimulating pathway,” said Giampaolo Corsini. “Innovation is the logical evolution of our services. This is a radical and in some ways disruptive innovation, which, with the assistance provided by big data and analytics, changes the world of services for decision makers as they work to optimize processes, maximize revenues and limit waste arising from decisions that are inaccurate because they are not backed up by current and predictive analysis.”
The strengths of the Premium platform are its plurality of external and internal certified real estate sources, the use of detailed cartography to correlate values with ISTAT census areas, timely updating of sources used by the model to compute risk indices, and the integration of socio-demographic, economic-financial and social big data.
The engine powering the algorithms of the Premium platform is MAGISTER, Prelios Valuations’ automated valuation model, a tool with more than 10 years of consolidated performance, a million data from six information sources updated every six months, and property time series dating back to 1996.
“Premium has been developed to enhance analysis, by banks in primis, of property securing loans granted to individuals and corporate entities,” said the head of business development at Prelios Valuations. "Now, with a simple click, banks can analyze a property in relation to over 300 categories of socio-demographic big data and to price and transaction time series dating back more than twenty years, and achieve the same level of satisfaction as when assessing the creditworthiness of loan applicants.”