FASB Update Removes Roadblock to Hedging With Derivatives

November 13, 2017 Bob Newman

November 13, 2017

Complex hedge accounting rules are high on the list of reasons that community banks have chosen to avoid derivatives as risk management tools. But the Financial Accounting Standards Board (FASB) created a stir a little over a year ago, when it promised to improve accounting for hedging activities. That stir turned into a wave of fanfare from community banks in August 2017, when the final Accounting Standards Update (ASU 2017-12) was issued for ASC 815 - Derivatives and Hedging, the standard formerly known as FAS 133. In order to appreciate the excitement surrounding the new hedging guidance from FASB, it helps to take a quick look at the history behind the accounting standard that is widely considered to be the most complex the accounting organization has ever issued.

About the Author

Bob Newman is Managing Director for Chatham’s Financial Institutions business which specializes in interest rate risk management, hedge accounting and investment advisory for banks. Prior to joining Chatham in 2003, Bob spent 20 years in commercial banking, helping to start the derivatives operation at Maryland National Bank and expand the derivatives effort at SunTrust. He graduated from the College of William and Mary with a BA in Economics and has earned the Chartered Financial Analyst (CFA) designation.
Follow on Linkedin More Content by Bob Newman

Banking in Uncertain Times: An Economic Update and Swap Sales Strategy Session

This webinar provides bankers, relationship managers and lenders critical insights they need to better serv...

Next Resource

Optimize Your Balance Sheet Under the New Hedge Accounting Guidelines

The FASB’s Accounting Standards Update (ASU) on derivatives and hedging provides much anticipated improveme...

Return to Home

Chatham Financial Resource Center

FASB Update Removes Roadblock to Hedging With Derivatives

About the Author

Previous Article

Next Resource

FASB Update Removes Roadblock to Hedging With Derivatives

About the Author

Previous Article

Next Resource

Other content in this Area

Despite intensifying global growth fears, U.S. equity markets marched higher last week, buoyed by a solid start to first-quarter earnings season and continued progress in U.S.-China trade talks.

As commercial borrowers seek long-term funding, it’s time for risk-averse community banks to examine commonly-held phobia about using swaps.

We will look at the markets, discuss risk management strategies, touch on the mandatory adoption date of ASU 2017-12 and provide our updated observations on SOFR.

Chatham would like to invite you to our second annual Swaps Tailgate. This event helps kick-off BankOnPurpose 2019, the premier global event for commercial banking executives.

As your bank grows, either organically or through acquisition, new challenges emerge. Partnering with an independent firm with decades of experience can ensure that your bank’s growth is healthy.

You launched a customer swap program for your financial institution. You may have one swap, or many swaps, under your belt and you want to understand just how successful your program has been.

This webinar will recap what we know so far about the transition toward risk free rates and provide insight into what financial institution management teams are doing now to prepare.

We will look at the markets, discuss risk management strategies, touch on the mandatory adoption date of ASU 2017-12 and provide our updated observations on SOFR.

Interest rate risk is embedded in every financial institution’s balance sheet. Board members should encourage their management teams to consider adding derivatives to their tool kit.

U.S. equity markets moved higher last week, as the three major U.S. indices reached 6-month highs on the back of solid domestic economic data and perceived progress in U.S.-China trade negotiations.

A borrower swap program is a tool to help banks compete for long-term, fixed-rate loans. Success starts with identifying goals, deciding how to resource, and building the program.

With so many moving parts, assessing the performance of the individuals responsible for managing the investment portfolio can be a difficult task.

Swaps have always been a useful way for banks to manage risk. Currency risk, credit risk and interest rate risk can all be hedged, separating out the different types of risk inherent in a transaction.

We will examined the factors driving the markets and discuss the balance sheet risk management strategies being considered across our client franchise. We also provided an update on the state of LIBOR

As rising short-term interest rates flatten the yield curve, the resulting squeeze in bank margins is leading executives to look in every nook and cranny seeking cost savings.

Our friends from PrecisionLender, sat down with Jimmy O'Boyle from Chatham to talk swaps. They discussed current lending trends and meaningful customer swap program stats.

Capping an end to one of the best quarters in recent memory, U.S. equity markets marched higher last week as investors reacted to U.S.-China trade negotiation developments

This webinar provides bankers, relationship managers and lenders critical insights they need to better serve their customers and succeed in today’s marketplace.

This video outlines how interest rates impact the typical bank, and explains the board’s role in mitigating interest rate risk.

Chatham's Todd Cuppia is quoted in a Risk article about the transition from LIBOR to SOFR, and how the shift to a secured benchmark could cause dislocation between bank funding and lending rates.