A Bank must have systems and controls to ensure that the Bank’s mark-to-market positions, whether in the banking book or trading book, are revalued frequently.
A Bank’s valuation process must use consistent and prudent practices and reliable market data, or, in the absence of market prices, internal or industry-accepted models, verified by a function independent of the relevant risk-taking business units.
A Bank that relies on modelling for the purposes of valuation must ensure that the model is validated by a function independent of the relevant risk-taking business units.
A Bank must establish and maintain policies and processes for considering valuation adjustments for positions that otherwise cannot be prudently valued, including concentrated, less liquid and stale positions.
A Bank must make appropriate valuation adjustments for uncertainties in determining the fair value of assets and liabilities.
A Bank operating a trading book must establish an appropriate valuation methodology and measurement model.