Regulation in Property Valuation & Wealth Management: Opportunities Instead of Obstacles

A regulatory change is imminent, as since the introduction of CRR III on 1 January 2025 and the ongoing requirements of MiFID II, the hurdles for banks, asset managers, and real estate advisors are increasing. However, behind the regulatory complexity lies enormous optimization potential if one utilizes the right digital tools.

Why Regulation Means Not Only Risk but Also Opportunity

The wave of regulation continues to roll on. Capital requirements are increasing, documentation obligations are on the rise, and ESG criteria are becoming the norm. Particularly affected: Real estate valuations and Wealth Management.

CRR III introduces new standards for property assessment with the term 'Property Value'. MiFID II, on the other hand, requires full transparency in the investment advisory process. Classical tools such as Excel lists are no longer sufficient.

New Requirements for Property Valuation – What Changes

From Market Value to Property Value

The 'Property Value' according to CRR III must be conservative, transparent, and long-term realizable. Expected price increases must not be factored in. Two methods are available:

1. Loan Value Procedure according to BelWertV

This method determines the property value based on the loan value. This is the value that can be realized in the long term and has already been established regulatorily in the past. This procedure corresponds to the German Loan Value Measurement Regulation (BelWertV) and is particularly suitable for banks that must meet high documentation standards.

2. Market Value Procedure with Portfolio Adjustment

Alternatively, the current market value can also be used. However, only on the condition that a subsequent review takes place. This must ensure that the value does not exceed the long-term sustainable level. The adjustment can be portfolio-based on statistical market data.

Real Capital Privilege and Risk Weights

Real estate-backed positions are now categorized more strictly:

• IPRE (income-generating)

• Non-IPRE

• ADC (Acquisition, Development, Construction)

This distinction has massive impacts on capital requirements. An incorrect classification approach can lead to up to 150% risk weight. More precise definitions of these terms can be found in the white paper 'Regulation in Digital Wealth Management and Real Estate Valuation'.

Wealth Management Between Efficiency and Compliance

MiFID II forces banks to perform a thorough suitability assessment, provide justification for product recommendations, and ensure cost transparency. This leads to longer advisory processes, often lasting over 60 minutes.

The solution: automated digital processes that seamlessly integrate regulation without compromising the quality of advice.

The Digital Response: fincite • cios & PriceHubble

A System for Everything

The software solution fincite • cios offers an All-in-One Wealth Management Software that covers the entire value chain from Onboarding to Reporting. Included, among other things:

• MiFID-II compliant advisory process

• Suitability statements & ex-ante cost information

• Regulatory review mechanisms with automated documentation

• Average time savings: 12 weeks per advisor per year.

Property Valuation Meets AI

PriceHubble complements fincite • cios with a data-driven, EBA-compliant assessment of real estate, including:

• Live market analysis

• Determination of the conservative 'Property Values'

• Integration into total assets and portfolio allocation

• Automatic monitoring & action recommendations

The 360° aggregation of all customer assets, including real estate, represents another decisive advantage. Through integration with PriceHubble, property values can be assessed in real-time and incorporated into the overall asset consideration. This enables more precise asset allocation and opens up new advisory approaches that take into account the entire wealth spectrum of the clientele.

- Dennis Ritter, Lead Private Banking Germany, fincite

Conclusion: Those Who Take Digitalization Seriously Win in Regulatory Terms

The combination of digital tools and regulatory know-how not only enables compliance with the regulations but also provides strategic consulting competence with real added value for clients.

Now seize the opportunity to reorganize your compliance management. Efficient, secure, and future-oriented. Do you want to know how you can provide regulatory-efficient advice or how you can implement the solution directly with you?

Then download the complete white paper from fincite & PriceHubble now or contact our WealthTech experts and schedule a free demo. We look forward to seeing you!

Frequently Asked Questions

What is CRR III?

CRR III (Capital Requirements Regulation III) is a revised EU regulation that will come into effect in January 2025 and defines new capital requirements for banks. It includes, among other things, stricter guidelines for property valuation, such as the introduction of the term 'Property Value', as well as new risk weights for residential and commercial properties. The aim is a more stable capital coverage and a more realistic assessment of collateral values.

What Impact Does CRR III Have on Property Valuation?

CRR III requires banks to value properties more conservatively. Expected price increases may not be taken into account. Instead, methods such as the loan value procedure or an adjusted market value procedure are utilized. This adjustment directly influences capital requirements and the risk assessment of property loans.

How Does MiFID II Affect the Investment Advisory Process?

MiFID II increases the requirements for transparency and documentation in the investment advisory process. Advisors must provide a suitability assessment, full cost transparency, and a product-related history of advice. Digital tools like fincite • cios help to implement these regulatory requirements efficiently and in a compliance-assured manner.

Why is Digitalization Crucial for Regulatory Processes?

Without digital processes, compliance with current regulations such as CRR III or MiFID II is hardly efficient. Manual workflows are error-prone and time-consuming. Platforms like fincite • cios allow for automated, compliant advice, including documentation, reporting, and real estate valuation in real time.

What Are the Benefits of Integrating Property Valuations into Investment Advice?

By integrating current property values, for example through PriceHubble, banks and advisors can realistically represent the entire customer wealth. This improves asset allocation, creates new cross-selling potentials, and strengthens customer loyalty through comprehensive advice.