This means banks must take the credit risk premium charged to cover expected losses to income, even if the related losses cannot be recognised until a much later date. 8. Points of divergence from banking supervision (3)  Standard setters also don’t appear to give much consideration to the financial stability implications of their proposals.
First, they seem indifferent to how much additional volatility could be created in banks’ financial statements as a result of the wider use of fair values. Second, they do not share the concerns of supervisors and many others that fair valuing changes in own credit risk is inappropriate, especially when this means recognising gains based on deterioration of one’s own credit.