Valuation. The IAG require that the national authorities use an independent third-party expert opinion for the purpose of valuation of eligible assets. The valuation should be transparent, preferably based on a range of approaches and common criteria to be adopted across EEA States (1). The Icelandic authorities have explained that the value assessment performed by the HFF used a model designed by KPMG Iceland. The Icelandic authorities have argued that as HFF has used a credit valuation model designed by outside consultants (KPMG Iceland), the valuation of the mortgage loan pool has been performed by an independent expert valuator. However, the Authority considers that, to be in line with the IAG, the valuation has to be designed and performed in full by an independent expert. To the Authority’s knowledge, no (other) third-party expert opinions are available in this case. Moreover, Chapter 5.5 of the IAG sets out a method of valuation of impaired assets in the context of an asset-relief measure. Paragraph 39 and 40 and Annex 3 introduce the concepts of cost, current market value, real economic value and the transfer value. Cost means the carrying amount or nominal value of the loans minus impairment. Current market value is the market value the impaired assets could have obtained at the market. The real economic value is the underlying long-term economic value of the assets, on the basis of underlying cash flows and broader time horizons. This should be calculated both for a base case scenario and a stress case scenario. The transfer value is the value attributed to impaired assets in the context of an asset-relief program. Furthermore, as long as the transfer price is higher than the market value, there is aid involved. In order for the aid to be declared compatible, the transfer price should be lower than or equal to the real economic value. Moreover, the IAG require that adequate remuneration for the State shall be secured. This may be secured by setting the transfer price below the real economic value. The Icelandic authorities have explained that the value of the mortgage loan pools are based on the book value of each individual mortgage, less expected loss, corrected for accrued interest and indexation. This was done in line with the credit evaluation model, designed by KPMG Iceland, which the Icelandic authorities have presented to the Authority. In terms of the IAG, this value corresponds to book value less impairment, i.e. cost. The value of the mortgage lo...
Valuation. (83) The IAC notes in section 5.5 that a correct and consistent approach to valuation is of key importance to prevent undue distortions of competition. The Commission has to carefully scrutinize the valuation and in particular the underlying general methodology in order to ensure a consistent approach at Community level. For that purpose the Commission has called on the technical assistance provided by its own experts. The Commission notes that the technical experts consider more information is needed.