Regulatory Alerts2015-10-07
Treatment for Illiquid Positions
The Supervisor of Banks issues prudent valuation guidance for banking corporations holding fair value positions, particularly those lacking observable market prices. Institutions must implement robust systems, independent price verification, and specific valuation adjustments to account for model risk and illiquidity. These regulatory capital adjustments for less liquid positions must impact Tier 1 capital and may exceed financial reporting valuations to reflect current market conditions.
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