1. This Section and related Section A2.5 in App2 provide Authorised Persons with Guidance on prudent valuation for positions that are accounted for at fair value, whether they are in the Trading Book or in the Non-Trading Book (also known as the banking book).
2. A framework for prudent valuation practices should at a minimum include adequate systems and controls and valuation methodologies. The Regulator's expectations in this regard are set out in Section A2.5 App2.
3. The Guidance is especially important for positions without actual market prices or observable inputs to valuation, as well as less liquid positions which raise supervisory concerns about prudent valuation. The Guidance is not intended to require Authorised Persons to change valuation procedures for financial reporting purposes.
4. The Regulator will assess an Authorised Person's valuation procedures for consistency with the Guidance. The Regulator may impose a valuation adjustment if there is a material degree of inconsistency between the Authorised Person's valuation procedures and the Guidance.