Circular 5/2003, of December 19, to Approved Valuation Companies and Services, amending Circular No. 3/1998 of January 27 on Information to be Submitted to the Bank of Spain (BOE of January 8, 2004)

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Circular 5/2003, of December 19, from the Bank of Spain, to Approved Valuation Companies and Services, amending Circular No. 3/1998, of January 27, on Information to be Submitted to the Bank of Spain (BOE of January 8, 2004)

Order ECO/805/2003, of March 27, on valuation standards for real estate and certain rights for certain financial purposes, repeals the Order of November 30, 1994 on valuation standards for real estate for certain financial entities. The main objective of the new Order is to enhance the technical and formal quality of valuations, increasing their transparency, adapting the calculation of the appraised value to various legal modifications (1), and promoting the responsibility of valuation entities in identifying and applying the most relevant technical parameters for valuations. To this end, in the context of mortgage-purpose valuations, the explicit introduction of the concept "mortgage value" is highlighted, defined as a prudent appraisal of the future possibility of trading the property, taking into account its long-term durable aspects, normal and local market conditions, its use at the time of the appraisal, and its corresponding alternative uses, excluding speculative elements.

The third additional provision of the new Order establishes that valuation companies and services will communicate to the Bank of Spain, in the manner and with the periodicity established by it, information on the "risk premiums" and "developer profit margins" referred to in Articles 38.3 and 41 of said Order, which they have been using in their activity, as well as on any other general technical parameter they regularly use in their professional practice for applying the different valuation methods, and which the Bank of Spain considers relevant to ensure uniform compliance with valuation regulations.

To develop what is provided in said additional provision and to, among other things, improve and expand the statistical information that has been received, it is necessary to amend Circular 3/1998, of January 27, on Information to be Submitted to the Bank of Spain. Despite the repeal of the aforementioned Order of November 30, 1994, it has not been considered necessary to amend the third rule 6 bis of Bank of Spain Circular 4/1991, of June 14, on accounting standards and financial statement models for credit institutions, in the sense of replacing the reference to said Order, since the new Order repeals the latter.

Consequently, in exercise of the powers conferred in this matter, and in accordance with Article 3 of Law 13/1994, of June 1, the Bank of Spain, after the mandatory report from the General Directorate of Insurance and Pension Funds and the National Securities Market Commission, has ordered:

First Rule.

Modifications to the text of Circular 3/1998, of January 27.

The following modifications are introduced into Circular 3/1998, of January 27, on Information to be Submitted to the Bank of Spain by approved valuation companies and services: [ 1 ]

1. In the first rule, letter b) of number 2 is given the following wording:

The following modifications are introduced into Circular 3/1998, of January 27, on Information to be Submitted to the Bank of Spain by approved valuation companies and services:

1. In the first rule, letter b) of number 2 is given the following wording:

«b) Prior to the 15th day of the third month following the close of each natural quarter, statements III and XI, and for each natural half-year, statements IV to VIII and X, shall be sent to the Bank of Spain. The information shall be presented with data accumulated to the close of the period, except for statements III, X and XI, which will include information on valuations carried out in the corresponding period.»

2. In the second rule, the second paragraph of number 2 is given the following wording:

«Prior to the 15th day of the third month following the close of each natural quarter, statements III and XI and, for each natural half-year, statements IV to VIII and X shall be sent to the Bank of Spain. The information shall be presented with data accumulated to the close of the period, except for statements III, X and XI, which will include information on valuations carried out in the corresponding period.»

3. In the third rule, number 1 is given the following wording:

«1. For statistical purposes, in the preparation of statements III to VI, X and XI, a valuation unit shall be considered each valuation file carried out by a valuation company or service that constitutes an individualized appraisal report and certificate; however, when said report and certificate includes the independent valuation of several registered properties, there shall be as many valuation units as registered properties, unless they constitute a complete building.»

4. In the third rule, number 2 is given the following wording:

«2. The submission of statements to the Bank of Spain must be made by electronic transmission, in accordance with the technical specifications communicated for this purpose. The Bank of Spain may also individually request the confirmation in duly completed printed forms of any of the statements submitted via electronic transmission.

Exceptionally, and only for duly justified reasons, the Documentation Office and Risk Central may authorize the submission of all or some of the statements on forms prepared by the Bank of Spain, which shall be delivered dated, stamped, and countersigned on all pages, and signed by a person with sufficient authority from the submitting entity, except when it comes to the balance sheet and profit and loss account, which necessarily must be signed by the chairman, chief executive officer, or general manager.»

5. In the third rule, a new number 3 is introduced, with the following wording:

«3. In the statements to be submitted to the Bank of Spain, monetary units shall be expressed in thousands of euros rounded. Rounding shall be to the nearest unit, with rounding up in case of equidistance.»

6. A fourth rule is introduced, titled Information Dissemination, with the following wording:

«The information received from valuation entities according to statement X shall be communicated, once aggregated, to the General Directorate of Insurance and Pension Funds and to the National Securities Market Commission, and shall be distributed among the valuation companies and services themselves.»

[1]

Texts incorporated into the reference regulations

Second Rule.

Modification of the statements in the annex of Circular 3/1998, of January 27, and incorporation of others new.

Statements I to IX contained in the annex of Circular No. 3/1998, of January 27, on Information to be Submitted to the Bank of Spain by approved valuation companies and services, are modified, adding the new statements III-2, IX-2, IX-3, X and XI, their format being as set out in the annex to this circular.

Final Provision. Entry into Force.

This Circular shall enter into force twenty days after its publication in the Official State Bulletin, without prejudice to the entry into force on October 9, 2003 of Order ECO/805/2003, of March 27.

Nevertheless, valuation companies and services shall submit the quarterly statements, III and XI, for the first time, with information referring to the second quarter of 2004.

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