TOOL 4.3
Whatever the type of collateral i.e. physical / or financial / intangible, a desk top valuation should start with the most recent valuation available, and then adjustments to the valuation should be made for the following factors:
» Control by the Bank
» Realisation in the stress scenario
» Cost to the Bank of legal ownership and realisation
1. RECENT VALUATION
| Source and Date | • Financial statements • Projections • Professional • Other |
2. CONTROL BY THE BANK
| Location of asset | • Friendly jurisdiction • Easy access to asset • Can the asset be easily identified / segregated |
| Condition | • Are maintenance records available? • What is the level of protection over the asset? • Is the asset perishable? • Does the condition depend on the business continuing? |
| Ownership/ title | • Can the asset be easily sold without reference to the Bank? • Can it be pledged? • Is theft / fraud possible? |
3. REALISATION IN THE STRESS SCENARIO
| Is there an independent market for the asset | • Is the asset liquid i.e. able to be realised into cash in 3 months? • Is there a recognised reference price, exchange, market? • How volatile is the market? • Has the market changed significantly since the last valuation? |
| Is the value related specifically to the business | • Is there a general downturn in the industry or just the client? • Have write downs been done by competitors? • Does the asset value depend on the business continuing? |
| Legal (See separate tool) | • Is there the power to sell? • Are injunctions, priority claims, set-off and disputes likely? |
4. COSTS TO THE BANK
| Ownership | • Costs pending sale on ‒ Maintenance ‒ Running ‒ Storage ‒ Insurance • Potential legal claims e.g. environment, taxes etc. pre and post realisation |
| Realisation | • Legal fees • Stamp duty |
