BBA has responded to the Basel Committee’s consultation on the fundamental review of the trading book. BBA says a review of Basel 3 methodology for Counterparty Valuation Adjustment should take place first. It also raises concerns about the proposals for a standardised floor that would limit the risks of relying on poorly specified internal models. To determine where the boundary between the trading and the banking book lies, BBA favours a test based on evidence of intent and ability to trade. This boundary should be permeable, to cater for changes in business model. Disclosure of transfers between books would do more for financial stability than the current proposal to stop the possibility of those transfers. (Source: BBA Response to Trading Book Review)