Regulatory Alerts2013-07-30
Added · Updated
Letter on Fair Values under IFRS - Use of Valuation Models
The National Bank of Belgium establishes minimum requirements for Belgian financial institutions and their auditors regarding the determination of fair values under IFRS, specifically restricting the use of valuation models when active market prices are available. Institutions must demonstrate convincingly that a market is inactive and that observed prices are not representative before deviating from market values, and must ensure valuation models use relevant specific market data and are adapted to complex instruments. The regulator mandates robust governance procedures, including official valuation policies, internal challenge processes, and internal audit coverage, while applying specific prudential assessment principles regarding model structure, testing proportionality, and consistency with market values.
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