Basel committee publishes fair value consultation

1 December 2008

A new set of proposals for improving the assessment of banks' fair value procedures has been published by the Basel committee on banking supervision.

In a statement, the committee's chairman Nout Wellink said the document forms part of a "broader effort" to strengthen risk management practices across the banking industry.

The main proposals contained in the document include promoting the use of diverse sources of information for valuations, increasing the use of independent verification and validation, and enhancing communication so that any uncertainty about valuations is known to both internal and external stakeholders.

In addition, the consultation calls for more consistency in valuation practices, risk management and reporting standards, as well as stronger oversight of the valuation process.

"This guidance will help supervisors assess the rigor of banks' valuation processes and promote improvements in risk management and control practices," Mr Wellink commented.

Stakeholders can submit comments on the paper until February 6th.

Hosted by the Bank of International Settlements, the Basel committee on banking supervision is a cross-border forum that exists to promote greater cooperation among regulators of financial institutions.

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