Overview of comments received

Sound credit risk assessment and valuation for loans

June 2006

This guidance was released during 2005 as a consultative paper, and the Committee received 15 comment letters from various interested parties. Generally, the commenters supported the paper and appreciated that it was principles-based rather than prescriptive and detailed in outlining accounting or supervisory guidance. Most of the commenters agreed that while loan loss estimates for accounting and regulatory capital purposes can be different, both estimates are based on similar principles, and bankers can utilise common data and systems for each of these measurements.

Some of the commenters suggested the guidance could be enhanced further by clarifying the concepts of capital's expected loss, accounting's incurred loss, and this guidance's estimated credit loss while other commenters opposed any such further enhancement. The Committee believes that providing such additional technical guidance would be inconsistent with the objectives of this principles-based paper. Other commenters suggested minor technical and terminology changes, many of which were incorporated in the final paper. Consequently, very few revisions were necessary.