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The Basel Committee on Banking Supervision issued a consultative paper on the supervisory guidance for assessing banks' financial instrument fair value practices. The paper provides guidance to banks and banking supervisors to strengthen valuation processes for financial instruments.
The principles promote strong governance processes around valuations; the use of reliable inputs and diverse information sources; the articulation and communication of valuation uncertainty to internal and external stakeholders; the allocation of sufficient banking and supervisory resources to the valuation process; independent verification and validation processes; consistency in valuation practices for risk management and reporting purposes, where possible; and strong supervisory oversight around bank valuation practices.
The guidance supports one of the key recommendations for enhancing transparency and valuation set out in the April 2008 Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience.
Deadline for responses is
Supervisory guidance for assessing banks' financial instrument fair value practices
FSF report on enhancing market and institutional resilience