Market Consistency and WMC [11]

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Bullet points include: A new IAS being introduced, IFRS 9, particularly relevant to banks. A conceptually similar subdivision to banking versus trading book still exists, but it is now specified according to the ‘business model’ adopted for a given portfolio. Can be ‘hold to collect’ (i.e. aim is to collect contractual cash flows, typically holding instrument to maturity), ‘hold to collect and sell’ or ‘other’. Only instruments in ‘hold to collect’ portfolios and whose cash flows are ‘Solely Payments of Principal and Interest’ can be valued at amortised cost. Others need to be fair valued, although sometimes value changes are carried through the other comprehensive income line and sometimes through the P&L. Regulatory capital calculations include ‘filters’ so do not necessarily align exactly with values shown in financial statements. US FASB introducing similar but not identical rules under CECL

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