Under the proposal, interest rate-sensitive financial assets, financial liabilities and eligible future transactions are aggregated into underlying portfolios and allocated to repricing time bands, resulting in net repricing risk exposure by time bucket.
The risk mitigation objective reflects management’s target profile and defines the extent to which net repricing risk is mitigated using interest rate derivatives, including the mitigated rate and relevant repricing horizon.
For measurement, benchmark derivatives are applied. The resulting Risk Mitigation Adjustment defers aligned derivative fair value changes and releases them to profit or loss in line with the repricing of the underlying portfolios, while residual changes are recognised immediately.
CET1-driven equity management is not always eligible under RMA
Dynamic portfolio rotations portfolio changes can trigger unintended P&L volatility
Proxy hedges are typically not economically effective. RMA mechanics do not reflect the reality of marketable derivatives purchase.
Centralised risk management faces strict RMA eligibility and documentation rules
We support institutions across governance, risk management and financial reporting, focused on bridging IRRBB practice with RMA mechanics:
BDO’s integrated accounting, regulatory and risk advisory capabilities enable you to navigate the proposed requirements efficiently and position your organization for a smooth and well-governed implementation once the final standard is issued.
