Our goal with the BBA is to capture all material risk of each supervised organization, leverage existing legal-entity standards, and minimize burden. In developing the BBA, we have been mindful of the role that the insurance industry plays through its buy-and-hold, long-term approach to investments. A capital standard can have incentive effects, sometimes substantial.
A capital standard that uses market-based valuation can 3/6  BIS central bankers' speeches  introduce volatility and procyclicality, and one that is excessively volatile or procyclical can influence a firm to veer away from a long-term perspective and concentrate instead on the short term. This can have undesirable consequences, including diminishing product availability.