A report compiled by the Real Estate Finance Group (REFG) promoted the creation of a public database containing information all of the UK’s commercial property loans. In a bid to increase transparency, the database can also be used by regulators to monitor risk levels and prevent financial catastrophes.
Nick Scarles, Grosvenor Finance Director and REFG chair said: "We need 'right touch' regulation fit for all stages of the cycle, rather than 'light touch' as the market rises followed by 'heavy handed' after a crash,"
The report states that key lenders should conduct risk analysis’ of their books that are accessible by regulators. Academics can then provide timely insight, including warnings of overheating, that can be responded to in times of market stress.
The database would have to be subject to controls to preserve public anonymity for lenders and borrowers.
The REFG has proposed seven reforms in total which included a committee of experts to analyse the market’s cycle and inform the regulator on their findings. Other recommendations comprised of: academic qualifications for key members of lending teams and for long-term LTVs to be assessed throughout the duration of loans rather than just at the outset.
The report intends to utilise the lessons that can be learned from the recent global financial crisis and limit the impact of an oncoming property crash.
The group was created to advise on a market structure and strategy that would act as a safety net should a crash occur. The group includes senior banking and property figures from the likes of Wells Fargo, CBRE Group and Grosvenor.
The report’s recommendations are currently open to public feedback, a final report will be published in early 2014.
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