Basel Committee and Fair Value

The Basel Committee on Banking Supervision recently met and issued, in response to a meeting in April of the G20, recommendations to the IASB regarding fair value measurement and related disclosures. These principles are in response to the recent financial crisis and include discussions related to procyclicality and systemic risk.

The principles reflect accounting lessons learned from the financial crisis, and note that the new standard should:

· Reflect the need for earlier recognition of loan losses to ensure robust provisions

· Recognize that fair value is not effective when markets become dislocated or are illiquid

· Permit reclassifications from the fair value to the amortized cost category; which should be allowed in rare circumstances following the occurrence of events having clearly led to a change in the business model

· Promote a level playing field across jurisdictions.