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This document was issued by the Basel Committee on Banking Supervision to provide supervisors with guidance on the prudential supervision of banks’ implementation of the fair value option. The guidance is principles-based and is structured around seven principles that fall into two broad categories: supervisory expectations relevant to the use of the fair value option and supervisory evaluation of risk management, controls and capital adequacy. While this supervisory guidance refers specifically to the fair value option in IAS 39, the Committee believes that the principles set forth in this document should be generally applicable to similar fair value option approaches that exist or are being considered in other accounting regimes. National supervisors will need to make this determination based on the criteria and requirements of the fair value option in their jurisdiction.