Prudent Valuation Guidance for the Trading book and the Banking Book
CA-5.1.8
This Section provides
Islamic bank licensees 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. This guidance is especially important for positions without actual market prices or observable inputs to valuation, as well as less liquid positions which, although they will not be excluded from the trading book solely on grounds of lesser liquidity, raise CBB's concerns about prudent valuation.January 2015CA-5.1.8.A
Positions in the
Islamic bank licensee's own eligible regulatory capital instruments are deducted from capital. Positions in other banks', securities firms', and other financial entities' eligible regulatory capital instruments, as well as intangible assets, are subject to the same treatment as that set down by the CBB for such assets held in the banking book (see Chapter CA-2 of this Module).January 2015CA-5.1.9
The valuation guidance set forth below is not intended to require
Islamic bank licensees to change valuation procedures for financial reporting purposes. The CBB will assess anIslamic bank licensee's valuation procedures for consistency with this guidance. One factor in the CBB's assessment of whether anIslamic bank licensee must take a valuation adjustment for regulatory purposes under Paragraphs CA-5.1.18.A to CA-5.1.20 is the degree of consistency between theIslamic bank licensee's valuation procedures and these guidelines.January 2015CA-5.1.9A
A framework for prudent valuation practices must at a minimum include the requirements outlined in this Section.
January 2015
