Sound credit risk assessment and valuation for loans

This paper is intended to provide banks and supervisors with guidance on sound credit risk assessment and valuation policies and practices for loans regardless of the accounting framework applied. As such, the principles in this paper are intended to be consistent with those set forth in the International Financial Reporting Standards (IFRS) applicable to loan impairment. Specifically, the paper addresses how common data and processes may be used for credit risk assessment, accounting and capital adequacy purposes and highlights provisioning concepts that are consistent in prudential and accounting frameworks. This guidance focuses on policies and practices that the Basel Committee on Banking Supervision believes will promote sound credit risk assessment and controls.