Risk transparency, control and certainty crucial to property development success under Basel III

Date

04 Dec 2012

Sections

Sustainable Dev.

Press release

 

RICS Project Monitoring in Property: a key risk-management tool for banks

 

Effective and early monitoring of development projects is essential for protecting banks’ interests and exposing potential project failure, says RICS in its Thought Leadership Paper ‘Project Monitoring in Property: a key risk-management tool for banks’.

 

With the core framework of Basel III in place, the focus now is on the implementation of the anticipated changes to banking practices, which includes the likely introduction of additional capital charges for different risks. The influence of Basel III, which strengthens the quality and quantity of capital and risk coverage and introduces some new prudential requirements, is already being felt in the increased cost of capital to borrowers, with banks becoming increasingly selective in the projects they are willing to fund.

 

The paper highlights inadequate monitoring as a potential cause of project failure that can be avoided by a pro-active risk management strategy. The report’s authors, the Built Environment Working Group of RICS Europe, suggest that clear and concise communication of the risks of a development project and adequate project controls are fundamental to avoiding project failure and to protecting banks’ interests.

 

According to the report, early appointment of an RICS qualified Project Monitor can allow banks to manage risk in an objective manner by identifying and advising on potential risk, thus reducing banks’ exposure and increasing the likelihood of a successful completion of the development.

 

Speaking about the paper, John Atkins MRICS, Chairman of the Built Environment Working Group, RICS Europe said:

“More than ever, it is important to increase the resilience of the banking system in Europe.

 

With this paper, we would like to emphasize how the future of project monitoring for property developments is crucial for providing banks increased risk transparency and exposing potential project failure.

 

RICS members working in this field of expertise are pleased to offer their advice and establishing a proactive, targeted and continuous dialogue with the banking community to explain the complex nature of the development process and the many factors that influence successful delivery of a property development, including the benefits of employing Project-Monitoring surveyors.”

 

 

Notes for editors

RICS Project Monitoring in Property: a key risk-management tool for banks

 

Digital copies of the publication are available at www.ricseurope.eu/knowledge

 

‘Project Monitoring in Property: a key risk-management tool for banks’ is the first Thought Leadership Paper produced by the Built Environment Working Group of RICS Europe. The paper discusses the impact of Basel III on property lending and property development in the wake of the financial crisis. It outlines common causes of project failure and details how risk transparency, control and certainty in all phases of property development can be improved.

 

About Basel III

 

Basel III has taken forward and refined the international banking regulatory framework of Basel II to address systemic risks exposed by the financial crisis, with the requirements of the regulatory framework extending to banks’ capital, liquidity and risk management. Successful implementation will require banks to evaluate their internal risk methodologies and put in place more proactive tools and systems for risk mitigation, transparency and tighter control of project capital. The reforms are designed to reduce the probability and severity of future financial crises. 

 

 

The paper highlights a correlation between all three areas and explains how the future of Project Monitoring for property developments is crucial for providing banks increased risk transparency and exposing potential project failure. This, in turn, protects the banks’ interests and enhances their risk-management functions, thereby aiding compliance with Basel III.

 

About RICS

RICS is the world’s leading qualification when it comes to professional standards in land, property and construction.

 

In a world where more and more people, governments, banks and commercial organisations demand greater certainty of professional standards and ethics, attaining RICS status is the recognised mark of property professionalism.

 

Over 100 000 property professionals working in the major established and emerging economies of the world have already recognised the importance of securing RICS status by becoming members.

 

RICS is an independent professional body originally established in the UK by Royal Charter. Since 1868, RICS has been committed to setting and upholding the highest standards of excellence and integrity – providing impartial, authoritative advice on key issues affecting businesses and society. RICS is a regulator of both its individual members and firms enabling it to maintain the highest standards and providing the basis for unparalleled client confidence in the sector.

 

For more information:

Laura Lindberg

Public Relations Manager (EMEA)

RICS - The mark of property professionalism worldwide

T +32 (0)2 739 42 27

E llindberg@rics.org

W www.ricseurope.eu

 

 

Nicola Gough 
Communications Project Coordinator (Europe)
RICS - The mark of property professionalism worldwide

T +32 (0)2 289 25 30
E
ngough@rics.org

W www.ricseurope.eu