Libor reform threatens hedge accounting for loans

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


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,

To continue reading...

You need to sign in to use this feature. If you don’t have a 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: