The global financial crisis that led by American subprime crisis is closely tied with the look-like fair assets Appraisal. We just wonder after the worst time of financial crisis, how to evaluate the losses from traditional assets appraisal and the challenges from financial crisis to assets appraisal. This is a key theme for the stable and safe market against potential next storm.

In the 4th World Appraiser Conference held by WAVO and China Appraisal Society (CAS), the overseas experts have been in hot discussion on this issue and reached a conclusion in the new perspective.

He Bangjing, the leader of the Discipline Inspection Team of Ministry of Finance and the president of CAS indicated in the press release that, being the intermediary business, the assets appraisal is considered as main tool for finance market to reduce and defend the risk and maintain the market security.

In regard to the function of asset appraisal to stabilize the market, Liu Ping, the vice president of CAS and Secretary General explained that, the theme of this conference that is “the market security and asset appraisal” in an international focus and closely tied with the assets appraisal industry. The conference has been paid much attention from all aspects such like government, market, industries, overseas fellow and media. It is believed that the asset appraisal is indispensable for the finance market.

Based on the general theme, the conference has five topics which are close to the demands of the current finance market, which including development of finance market and assets appraisal , finance innovation and assets appraisal, management and evaluation of mortgage, evaluation of financial institutions and appraisal of financial assets. The experts have discussed the every topic with deep understanding and various perspectives. Also, the discussions are obvious tied with the assets appraisal and about the relationship between the stable finance market and assets appraisal in the post-phase of financial crisis and the function of appraisal.

The nature of assets appraisal is to find the real value of financial assets in order to stabilize and secure the market; it functions as the bubble-breaker and stabilizer. The assets appraisal is a floating medium and a baseline, which is able to restrict and reduce the financial risk and maintain the stable market. Meanwhile, it works as the warning and standard of financial supervision, which is very effective.

One of the biggest mistakes that led the American subprime crisis and global financial crisis, is due to the misuse or mistake of traditional assets appraisal. 

According to He Bangjing, the financial crisis revealed the fragility of financial system from all over the world and some issues in the appraisal. However, in some countries, the financial derivatives are given less attention, and the appraisal institutions misled the investor or even helped the cheating behavior. 

According to Chen Xi, the director of ICBC, Credit Division, the flaws of traditional assets appraisal have been disclosed by the subprime crisis. The purpose of operators is the main contribution to the deteriorating crisis, not the fair value. In the rising phase of the market, the fair value is considered as the fairest standard while the financial assets been overestimated. In the falling phase of the market, the fair value became the scapegoat while the financial assets been underestimated.      

Wang Zilin, the president of Zhong Lian Assets Appraisal indicated that, the financial crisis revealed an important issue that the professionals misunderstood the fair value as the market value which creates the blind worship.

We have to learn a lesson from this financial crisis to correct the mistakes of traditional assets appraisal based on science. Otherwise, the new storm will be unavoidable.

China hasn’t been influenced by the financial crisis, just like America. It shows that China has a sound and perfect financial system. The reason is that the financial system in China is not as developed and complicated as America. And the globalization of finance just starts.

Compared with the developed finance countries, the assets appraisal industry is lagging, especially in financial sector.

In the past ten years, China is in the transformation phase with focus in financial reform and assets appraisal. But the attention to the appraisal of anti-financial risk is paid in recent years after the commercialization of state-owned banks.

Sun Xiaoxia, the director of Ministry of Finance indicated that the operation system, supervision, assets and debt of financial corporations are totally different from other business corporations and own particularity. This is not only the new theme for research, but also the new challenges. There are four challenges for the financial assets appraisal, first is the value of franchising is hard to estimate; second is that the value of brands, branches and custom resources lacks the scientific evaluation; third is that the value from government’s invisible guarantee and support to financial institutions is less researched; forth is that the forecast of the macro-economy has direct influence on the evaluation of financial institutions. 

According to expert, in regard to the issues of mortgage evaluation, there are three problems, first is that the external appraisal institutions of banks and their appraisers lack the deep understanding and rich experience to finance appraisal. Also, the banks lack the experienced appraisers; second is that the mortgage data of banks is insufficient without systematic and normal data preference; third is that currently there are no regulations towards financial assets appraisal and laws to clarify the obligation of creditors, debtors, mortgagers and appraisal institutions with purpose of protecting the financial creditor’s rights. In general, the industry lacks a complete regulation. 

Zhang Xiaosong, vice president of CGWAMC said the non-performing assets are different from other assets. It has more complicated process and more difficult in assets evaluation. In this case, the domestic theory and technique of evaluation has not been formed which in the primary and research phase.

Currently, it is estimated that there are 30,000 appraiser and 80,000 working staff. They should be positive to the challenges and keep improving in order to play an important role in protecting financial market.

He Jingbang proposed three pieces of advice first is to strengthen the construction of the evaluation team. The Assets Appraisal Association plans to create sound nurturing system of appraisers in finance sector, strengthening education, improving the quality of appraisers, building a qualified and competent team of appraisers; second is to abide by the business ethic.The appraisers should strictly comply with the business ethic in order to guarantee the quality of work; third is to promote the research of financial assets evaluation. It is required to the theory of financial innovation and assets price brought by the financial crisis. Focused on the research of the function of assets appraisal against the financial crisis, the evaluation of financial derivatives, inflated assets price and the influence fr0m spiral wave to financial risk and the evaluation under the Basel Accord, in order to make breakthrough.