endobj Basel III: A global regulatory framework for more resilient banks and banking systems 1 Introduction 1. These systems must be integrated with other risk management systems within the organisation (such as credit analysis). Reduced liquidity may have arisen from market events. endobj application/pdf endobj The BIS hosts nine international organisations engaged in standard setting and the pursuit of financial stability through the Basel Process. 3.2 Credit valuation adjustment 28 3.3 Wrong way risk 29 3.4 Asset value correlation 29 3.5 Central counterparties 29 3.6 Enhanced CCR management requirements 29. 0000012488 00000 n <> 2019-07-03T04:45:55.000Z As part of their procedures for marking to market, banks must establish and maintain procedures for considering valuation adjustments. endobj 930 0 obj Banks must mark-to-market as much as possible. This section provides banks with guidance on prudent valuation for positions that are accounted for at fair value, whether they are in the trading book or in the banking book. 2019-07-05T03:19:41.560Z 0000008508 00000 n 886 0 obj [676 0 R 680 0 R 683 0 R 684 0 R 687 0 R 688 0 R 689 0 R 690 0 R 691 0 R 692 0 R 693 0 R 694 0 R 695 0 R 696 0 R 697 0 R 698 0 R 699 0 R 700 0 R 701 0 R 702 0 R 703 0 R 704 0 R 705 0 R 706 0 R 707 0 R 708 0 R 709 0 R 712 0 R 717 0 R 718 0 R 719 0 R 720 0 R 724 0 R 728 0 R 729 0 R 734 0 R 735 0 R 739 0 R 740 0 R 741 0 R 742 0 R 747 0 R 748 0 R 752 0 R 753 0 R 754 0 R 759 0 R 763 0 R 764 0 R 765 0 R 766 0 R 767 0 R 770 0 R 775 0 R 776 0 R 777 0 R 781 0 R 785 0 R 786 0 R 787 0 R 792 0 R 793 0 R 794 0 R 798 0 R 799 0 R 800 0 R 805 0 R 806 0 R 810 0 R 813 0 R 818 0 R 819 0 R 823 0 R 827 0 R 828 0 R 829 0 R 834 0 R 838 0 R 839 0 R 840 0 R 841 0 R 842 0 R 845 0 R 846 0 R 847 0 R 848 0 R 849 0 R 850 0 R 851 0 R 852 0 R 853 0 R 854 0 R 856 0 R 859 0 R 861 0 R 864 0 R 866 0 R 869 0 R 872 0 R] endobj %%EOF Banks should maximise the use of relevant observable inputs and minimise the use of unobservable inputs when estimating fair value using a valuation technique. It is the process by which market prices or model inputs are regularly verified for accuracy. This document, together with the document Basel III: International framework for liquidity risk measurement, standards and monitoring, presents the Basel Committee’s1 reforms to strengthen global capital and liquidity rules with the goal of promoting a more 2126 0 obj <> endobj The valuation guidance set forth below is not intended to require banks to change valuation procedures for financial reporting purposes. endobj the past on, This section provides banks with guidance on prudent valuation for positions that are accounted for at fair value, whether they are in the trading book or in the banking book. <> <> Banks must establish and maintain adequate systems and controls sufficient to give management and supervisors the confidence that their valuation estimates are prudent and reliable. 0000016079 00000 n Clear and independent (ie independent of front office) reporting lines for the department accountable for the valuation process. The Basel committee on banking supervision (BCBS) sets the standard for international banking prudential regulation. endobj %PDF-1.6 %���� endobj CCR2 - Credit valuation adjustment (CVA) capital charge 14 ... Basel III - Pillar 3 Disclosure Report as at June 30, 2019 Page 2 of 17 PUBLIC Overview of risk management and Risk Weighted Assets ... 7 Prudential valuation adjustments 0 8 Goodwill (net of related tax liability) 14,521 B 107 25 Such systems must include: Documented policies and procedures for the process of valuation. International banking regulation standards under Basel III. 909 0 obj Supervisory authorities will consider the following in assessing whether a mark-to-model valuation is prudent: Senior management should be aware of the elements of the trading book or other fair-valued positions which are subject to mark to model and should understand the materiality of the uncertainty this creates in the reporting of the risk/performance of the business. 878 0 obj endobj endobj While daily marking-to-market may be performed by dealers, verification of market prices or model inputs should be performed by a unit independent of the dealing room, at least monthly (or, depending on the nature of the market/trading activity, more frequently). Additionally, close-out prices for concentrated positions and/or stale positions should be considered in establishing the adjustment. endobj h�bbd``b`���@�1 �d"��{0���&@�������.����#X��pG�@0�%Z��_�? 51 0 obj BIS statistics on the international financial system shed light on issues related to global financial stability. 136 0 obj 900 0 obj <>/Metadata 1093 0 R/Pages 2 0 R/StructTreeRoot 50 0 R/Type/Catalog>> Basel III Pillar 3 Disclosures: Prudential Standard APS 330 ... 7 Prudential valuation adjustments N/A 8 Goodwill (net of related tax liability) 1,441.5 d ... 1 The Adjustment column reflects entities that are treated as non-consolidated entities and are excluded from the Level 2 … 910 0 obj 0000000016 00000 n [54 0 R 59 0 R 60 0 R 63 0 R 64 0 R 65 0 R 66 0 R 67 0 R 68 0 R 69 0 R 70 0 R 71 0 R 72 0 R 73 0 R 74 0 R 77 0 R 78 0 R 79 0 R 80 0 R 81 0 R 82 0 R 83 0 R 84 0 R 85 0 R 86 0 R 87 0 R 88 0 R 92 0 R 93 0 R 96 0 R 97 0 R 100 0 R 101 0 R 104 0 R 105 0 R 108 0 R 109 0 R 112 0 R 113 0 R 115 0 R 116 0 R 117 0 R 120 0 R 121 0 R 122 0 R 123 0 R 124 0 R 126 0 R 127 0 R 130 0 R 131 0 R 132 0 R 133 0 R] <> The current set of standards developed by the committee is known as the Basel III framework. <> When marking to model, an extra degree of conservatism is appropriate. endobj <> 2248 0 obj <>stream This guidance is especially important for positions without actual market prices or observable inputs to valuation, as well as less liquid positions which raise supervisory concerns about prudent valuation. endobj 2019-07-03T12:45:55.000+08:00 The BIS offers a wide range of financial services to central banks and other official monetary authorities. Risk management should be aware of the weaknesses of the models used and how best to reflect those in the valuation output.