Basel Committee proposes fair value guidance

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02 Dec 2008

The Basel Committee on Banking Supervision has invited comment on proposed Supervisory Guidance for Assessing Banks' Financial Instrument Fair Value Practices.

The comment deadline is 6 February 2009. The guidance is intended to help supervisors assess the rigour of banks' valuation processes and to promote improvements in risk management and control 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. The main principles in the proposed Basel Committee guidance are:

  • strong valuation governance processes;
  • use of reliable inputs and diverse information sources;
  • independent verification and validation processes;
  • communication of valuation uncertainty to internal and external stakeholders;
  • consistency in valuation practices for risk management and reporting; and
  • strong supervisory oversight around bank valuation practices.

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