What changed
The 2023 Directions replace the 2021 framework, which was based on October 2000 standards. The update introduces symmetric fair value gains/losses treatment, a clearly identifiable trading book under Held for Trading (HFT), removal of the 90-day ceiling on HFT holding period, removal of ceilings on Held to Maturity (HTM), and more detailed investment portfolio disclosures.
What it means for you
Banks must align investment classification and valuation with updated global standards and domestic market progress. The symmetric fair value treatment will impact profit and loss volatility, while the removal of HTM ceilings offers greater flexibility in portfolio management. Enhanced disclosures will increase transparency for regulators and stakeholders.
What you must do
- Review and update internal investment classification policies to align with the new HFT, symmetric fair value, and HTM provisions.
- Prepare systems and processes for enhanced disclosure requirements on the investment portfolio.
- Train treasury and risk management teams on the revised framework, including the removal of the 90-day HFT holding cap.
- Ensure compliance with the effective date of April 1, 2024, for the accounting period commencing on or after that date.
Who it affects
All commercial banks (excluding Regional Rural Banks), Treasury departments, Risk management teams, Compliance and finance functions
When do these revised Directions take effect?
The Directions are effective for accounting periods beginning on or after April 1, 2024.
What is the key change regarding Held for Trading (HFT)?
The revised framework removes the earlier 90-day ceiling on the holding period under HFT and introduces a clearly identifiable trading book.
Are Regional Rural Banks covered under these Directions?
No, the Directions explicitly exclude Regional Rural Banks from their applicability.