Swaps users wary of hedge accounting hit from Brexit transfer

Uncertainty over exemption for novated trades may force hedgers to sacrifice netting benefits

Europe’s corporate treasurers are conflicted over whether to shift existing trades with London-based bank counterparties to entities in the European Union and risk disrupting their hedge accounting arrangements, amid preparations for Brexit. Some are considering the alternative course of running parallel swaps books in two different jurisdictions – even if this is likely to compromise netting efficiency.

The uncertainty hinges on an exemption that would preserve the hedge accounting treatment