Libor reform threatens hedge accounting for loans

Changes to loan terms may nullify contracts and create balance sheet volatility

broken-hedge-accounting

As the loan market prepares to switch to a new reference rate, concerns are growing that the forced renegotiation of contracts may interfere with hedge accounting arrangements, causing disruption to firms’ balance sheets.

The industry is developing fallback measures for cash products to transition from the discredited Libor benchmark to a new suite of risk-free rates. This will require bilateral discussions between counterparties, but any changes to the terms of a loan may nullify the contract,

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: