ABSTRACT
Given their intertwined destiny with and long position on real estate, banks need to develop an active approach to understand, analyse, monitor and manage their risk/return profile on this asset class. Banks could try to optimise this in a number of ways and by developing a holistic approach to manage real estate as core asset, collateral to lending and NPL and as an investable asset for their asset management and insurance businesses. Multiple levers and course of actions are possible, but they need close coordination and a consistent approach across the key processes and main value chains (starting from the ones related to the lending and real estate businesses). Far from falling into the trap of managing a Babylon of approaches and an alphabet soup of KPIs, banks should develop a strategy that is active, holistic but also “integrated” – covering the key topics in a well-coordinated and efficient/effective way. The authors argue how, eventually, the set-up of a REIS (Real Estate Integrated Services company or dedicated unit) and of a chief real estate officer (CREO) would significantly improve the ability of banks to design and executed such strategies in a successful way.
