The Commercial Real Estate Finance Council Europe (CREFC Europe) has submitted its response to the Bank of England’s discussion paper on improving the availability of UK credit data, focusing specifically on commercial real estate (CRE) debt market information.
The CREFC Europe response focuses on the discussion paper’s exploration of the potential regulatory and market benefits of improved CRE lending market data quality and availability, and makes the following points:
• The informational challenges and their solutions in the CRE lending market are quite different from those affecting the SME lending market. It is the CRE solutions that are relevant where CRE lending to SMEs is concerned.
• CREFC Europe generally agrees with the thrust of the recommendations set out in A Vision for Real Estate Finance in the UK, and sees the creation of a comprehensive UK CRE loan database as a foundational element for promoting a healthier, more liquid and more stable CRE debt market that poses lower risks to financial stability.
• Provided regulators encourage interested market participants and observers to take an active role in developing the detail of the proposal, a loan-level UK CRE database could deliver substantial market and regulatory benefits. CREFC Europe’s European Investor Reporting Package (E-IRP) would be a natural starting point for the reporting template.
• From the market perspective, better quality, transparent data should encourage greater standardisation and consistency in loan documentation, improving market liquidity and making CRE debt a more credible investment proposition, particularly for indirect and passive investors.
• From the regulatory perspective, access to timely, reliable, comparable data is a necessary (albeit not sufficient) condition for good micro- and macro-prudential regulation. If regulators have access to appropriate expertise (internally and externally), they will be far better positioned to manage the feedback loops between property and credit cycles effectively, enhancing the resilience of the financial system and the stability of capital flows.
• There is scope for a UK initiative in this area to set the standard for improved data quality and transparency in other markets and better data consistency and comparability internationally.