New objective values would harm banks
Banks are proving a major stumbling block to attempts to adjust property rates used for tax purposes (known as “objective values”) as simply leveling them with actual market prices would likely harm local lenders’ capital adequacy ratios.
A senior Finance Ministry official says that if the existing objective values were reduced to the level of the going rates – at a time when the difference in certain areas amounts to 40 or 50 percent – the credit institutions would suffer great losses from the drop in the value of the collateral for mortgages.
Mortgages currently add up 64.8 billion euros. Of that amount, 42 percent qualifies as bad loans, adding up to 27.2 billion euros, while the other 37.6 billion is properly serviced.
In any case the adjustment of the objective values remains a tough challenge for the ministry as the country’s bailout commitments dictate that the new system for the calculation of property values will have to start operating on June 1, and under the existing conditions it is impossible to form a system that will be adjusted on a quarterly or even biannual basis.