Dynamic risk management (Accounting for IRRBB)

EFRAG outreach questionnaire to banking investors/analysts about the accounting for hedging activities of interest rate risk in the banking book (IRRBB).

Managing the interest rate risk in the banking book is important from both a regulatory and an investing perspective. These activities often give rise to complex accounting issues and debates. In 2004, the EU carved out certain of the requirements from IAS 39 Financial Instruments: Recognition and Measurement on fair value portfolio hedging.

According to the European Commission, the carve out of certain hedging accounting provisions reflects criticism by many European banks that IAS 39 poses a major problem for operating their risk management practices. Unlike IAS 39, the EU carve out allows the hedging of core deposits and reduces the ineffectiveness recognised in profit or loss.

The EFRAG Board has requested outreach with users to understand their views on the EU carve out.

 
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1. Please provide your name and surname
2. Please provide your background (equity/debt; sell side or buy side)
3. Banks currently provide significant information about financial risks – including interest rate risk in the banking book in the risk section of the annual information as well as under Pillar 3. Do you feel that this information is sufficient and if not, what additional information do you think should be required?
4. Please provide further information to explain your answer to Q3 if you consider it necessary.
5. Do you consider that banks currently provide enough information about their management of interest rate risk in the banking book?
6. Please provide further information to explain your answer in Q5 if you consider it necessary.
7. There are few disclosure requirements currently, and also little information about the accounting for macro or portfolio hedging in the financial statements currently. What information provided by preparers currently do you use and how?
8. Following on from the previous question (Q7), what other information would be useful?
9. As there are no specific disclosures mandated about the EU carve-out from IAS 39, have investors/analysts been receiving sufficient information about the carve-out’s use and impact?
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10. Please provide further information to explain your answer in Q9 if you consider it necessary.
11. Do you think it is important to understand the EU carve-out and its implications for the financial statements or do you consider it as unimportant?
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12. When comparing banks that use the EU carve-out to those that do not , do you factor this difference in accounting into your estimates and view of the bank?
Clear selection
13. If you do incorporate the use or non-use of the EU carve-out in your analysis, how do you do this?
Thank you for your time
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