Valuations of the assets and liabilities of a business that has either failed or is likely to fail will be based on very different criteria to valuations carried out for other purposes, such as financial reporting. The differences affect the type of asset that can be included, the inputs that are available, the investigations that can be made and the assumptions that may be appropriate.

The need for international consistency in such valuations is highlighted by the current initiatives by financial regulators to put in place common regimes for the recovery and resolution of financial institutions in accordance with the Financial Stability Board’s “Key Attributes of Effective Resolution Regimes for Financial Institutions”. The FSB’s “Key Attributes” include provisions for the valuations as part of the recovery and resolution process.

The Standards Board has commenced a project to develop guidance on valuations for resolution and recovery. The initial focus will be on the assets typically found in financial institutions, as this is the area of greatest current need given the emerging new regulations in various jurisdictions. However, the Board intends this to be a broad scope project, as the underlying principles should be common to most types of asset and industry. The Board’s initial view is that the project will probably lead to a new Application Standard setting out common principles for the valuation of failed or likely to fail businesses, with accompanying guidance for specific applications, of which the resolution of financial institutions will be an example.

A working group was formed and had its first meeting in September 2014.

Working Group:

Raj Brar

IVSC Board Member  - Project Leader

Cindy Ma

IVSC Board member

Stephen Luxton

JP Morgan

Savraj Dhillon

UBS

Tanveer Bhatti

Citigroup

Vikas Karlekar

Barclays

Mark Newman

Royal Bank of Scotland

Richard Thomas

Goldman Sachs

Viral Desai

KPMG

Germar Knochlein

European Central Bank

Pablo Perez

Bank of Spain

Brandon Khoo

Australian PRA

Project Commenced June 2014

Discussion Paper Q2 2015