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To avoid possible pro-cyclical effects the EBF proposes to modify the valuation techniques in illiquid markets within the framework of IAS 39.
The complex valuation models used for instruments that do not trade or for which no active market exists rely on assumptions, estimates and past experiences of the individual bank, EBF notes. Given the number and complexity of financial instruments, individual financial institutions are best placed to decide which method of fair value determination is most appropriate for a specific asset or liability.
However, any change in accounting standards must be carefully considered in consultation with the industry, EBF warns.
The EBF believes that the implementation of IFRS 7 and Pillar III are important steps towards increasing the transparency of financial instruments and their risks. Also, consolidation rules have proved robust, the Federation says. Further disclosures about securitisations required by Pillar III may help the market better understand such transactions.