Financial Institutions Case Study: Accounting Needs
A regional bank with over $10 billion in assets that had an existing hedging program and a pressing accounting need.
The bank had executed balance sheet derivatives, but its auditors had expressed concerns about the hedge designation memorandums, encouraging the bank to contact Chatham as soon as possible. Reluctant to partner with a derivatives consultant on any portion of its hedging program, the bank called Chatham nonetheless to schedule a face-to-face meeting.
Chatham Financial reviewed the company’s hedge documentation and traveled to the bank for the face-to-face meeting. Chatham addressed the prospect’s concerns about hiring a third-party advisor and walked the bank through Chatham’s process for creating hedge documentation, the experience in implementing hedge accounting and the systems Chatham uses to run different types of effectiveness tests. Furthermore, by describing Chatham’s client base, Chatham helped the prospect feel comfortable that Chatham works with banks of all sizes, including some of the largest financial institutions. Ultimately, Chatham gave this bank comfort that Chatham could not only serve its accounting needs, but also the bank’s strategic needs for balance sheet hedging.
The bank engaged Chatham to de-designate its existing balance sheet transactions and then re-designate them, using a more robust methodology. It has turned to Chatham for the warehousing of all of its existing balance sheet trades and for strategic consultation on future balance sheet transactions. Recently, it executed a $100 million balance sheet hedge, relying on Chatham for all of its accounting advice.