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Basel regulators plan trading book paper shortly, issue documents on LGD, QIS5 and fair value option

KRAKOW, Poland, July 13 (Global Risk Regulator) – Global banking regulators expect to issue shortly a document on the treatment of banking trading book issues under the international Basel II bank safety rules.

The top banking supervisors from North America, Europe and Japan who form the Basel Committee on Banking Supervision said today they had "reviewed with satisfaction" the results of their joint work with the world’s securities market supervisors on the treatment of certain trading related exposures and so-called double defaults under Basel II.

The Basel Committee, which had a two-day meeting in Krakow this week as part of its dialogue with banking supervisors from around the world, also issued documents relating to the complex, risk-focused Basel II bank capital adequacy rules.

One gave guidance on the estimation of loss given default, or LGD, during economic downturns for banks using the advanced internal ratings based approach to measuring their credit risk under Basel II.

The Committee also issued consultative material on the planned fifth quantitative impact study (QIS5) that will test the effects of Basel II on banks in several countries. The Basel regulators plan to issue the final version of the QIS5 package in September, in time for the data collection exercise to be carried out between October and December.

The Committee also issued a consultative paper on guidance for the use by banking organisations of the fair value option amendment recently agreed by the International Accounting Standards Board, the London-based accounting standards setter that developed the new International Financial Reporting Standards, or IFRS.