Reporting interest rate risk management: EFRAG calls for input from banking analysts and investors

EFRAG is reaching out to understand the perception of
banking analysts and investors regarding the current reporting for portfolio hedging of interest rate risk and the use of the EU carve-out from IAS 39
Financial Instruments: Recognition and Measurement. Please fill in our
Questionnaire by
2 March 2022.

​In the context of the work that EFRAG is performing on the IASB's current research project on Dynamic Risk Management, the EFRAG Secretariat is performing outreach in order to understand views of investors and analysts around certain accounting practices used by EU banks currently when reporting on management of interest rate risk in the banking book (IRRBB). These activities often give rise to complex accounting issues and debates.
In 2004, certain of the IAS 39 Financial Instruments: Recognition and Measurement requirements on fair value portfolio hedging were carved out to improve operationality of the requirements for the risk management practices of EU banks. In short, the EU carve out allows the hedging of core deposits and allows to designate a proportion of the hedged positions (the so-called ‘bottom layer’) in order to get a better alignment of the accounting designation with the risk management practices thus limiting the accounting ineffectiveness.
Almost all large EU listed banks apply the EU carve out at least to part of their portfolio hedges, while those banks outside the EU that do fair value portfolio hedging, use the IFRS Standard as issued by the IASB and do not apply the EU carve out.

Therefore, we invite you to complete this Questionnaire to provide us with your views by 2 March 2022. The questionnaire should take approximately 20 minutes to complete.