• The definition of fair value now includes the notion of a reference market. The transaction price is presumed to be fair value, but in certain instances (when the transaction did not take place in the reference market and the entity would trade in a more advantageous market for the item), the actual transaction price may be rebutted.
• The fair value of a liability must incorporate the entity's own credit standing.
• The Working Draft increases to five the number of levels in the fair value hierarchy. The levels are based on the nature of the inputs used to establish estimated fair value and descend in reliability from Level 1, constituting market inputs that reflect quoted prices for identical assets or liabilities, to Level 5, representing values that are significantly based on entity inputs that are extrapolated or interpolated but that are not corroborated by other market data.
• The Working Draft prohibits the use of blockage adjustments in estimating the fair value of large blocks of financial instruments.

We concur with the proposed amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates (IAS 21) on the basis that the accounting treatment in the consolidated financial statements should not depend either on the currency in which the monetary item is denominated or on which entity within the group transacts with the foreign operation. We express some concern about requiring that the Technical Correction be applied retrospectively.

We believe that the guidance proposed by the Basel Committee on Banking Supervision will be perceived as an additional set of accounting rules applying to the banking industry in order to limit the use of the fair value option. We recognise that on page 1 of the Consultative Document it is stated that the Committee does not consider this proposal to be a set of additional accounting requirements, but we believe that this will be the effect, in practice. We are strongly of the view that the objective of the International Accounting Standards Board (IASB) is to set high quality accounting standards that entities across all industries have an equal opportunity to apply. We believe Banking Supervision has an important but separate and different objective and we support the Committee's work in promoting Prudential Supervision. We are concerned therefore that the proposals in the Consultative Document go beyond addressing the regulatory objective and will hinder the ability of a specific industry to apply an explicit option in the IASB's accounting standards.