Updating of Assets Portfolios
In May 2008, the Bank of Spain published the Solvency Circular (C3/2008), under which financial entities were allowed to adjust generic provisions to take into consideration their specific characteristics. This change in risk management policy was introduced to reconcile the Basle II and the Spanish provisions system, in order to avoid breaching the firm discipline of solvency that has characterised the Spanish financial system.
Under “Equity for Credit Risk Requirements", in Section Three: “Credit Risk Reduction”, the Circular defines the specific hedging requirements, based on real guarantees - specifically property (residential and commercial) mortgages -, with regard to property value review.
In order to cater for its customers needs, Tinsa has developed a statistical procedure that makes it possible to update the valuation of real estate asset portfolios. This means that the periodic control of the value of said guarantees, required under Basle II, can be carried out using this Automatic Valuation Model (AVM), which has been developed by Tinsa.
This system also enables greater segmentation in order to improve the accuracy of the updating indexes and to conduct a complementary study of the financial entity's live portfolio with the market represented by Tinsa's valuations.