EMIR - Opinion of the European Banking Authority on Mortgage Lending Value (MLV)
According to Article 124(1) of Regulation (EU) No 575/2013 (CRR), the part of an exposure treated as fully secured by immovable property can be determined based on mortgage lending value (MLV) in those Member States that have laid down rigorous criteria for the assessment of MLV. The EBA has the mandate to develop the draft Regulatory Technical Standards (RTS) to specify the rigorous criteria for the assessment of MLV, as specified in Article 124(4)(a) of Regulation (EU) No 575/2013 (CRR). MLV is a concept defined in the CRR (Article 4(74)), as follows:
‘the value of immovable property as determined by a prudent assessment of the future marketability of the property taking into account long-term sustainable aspects of the property, the normal and local market conditions, the current use and alternative appropriate uses of the property’
The mandate for the RTS on MLV is given in the context of the Standardised Approach, where capital requirements for exposures secured by mortgages on immovable property are specified. In addition to the use of MLV in the Standardised Approach (Article 124, 125 and 126 CRR), the concept of MLV is referred to in the CRR in the context of the credit risk mitigation framework (Article 229 CRR) and in the large exposures framework (Article 402 CRR). Furthermore, MLV is linked with capital requirements for exposures in the form of covered bonds. Article 129 CRR sets out a number of requirements to qualify for a preferential risk weight on covered bonds, which includes in Article 129(3) CRR an indirect reference to the concept of MLV given its reliance on the credit risk mitigation framework (Article 229(1) CRR)..."