EBA欧洲银行-2014-10-16-28Let-to-Mr-Hoogervorst-IASB-RE-Approach-to-Macro-Hedging2920si-_18页_568kb

EBA Comments on IASB Discussion Paper: Accounting for Dynamic Risk Management

Core Content

The European Banking Authority (EBA) has provided detailed comments on the IASB's Discussion Paper DP/2014/1, titled "Accounting for Dynamic Risk Management: a Portfolio Revaluation Approach to Macro Hedging." The EBA supports the IASB's initiative to develop a macro-hedge accounting model that better reflects dynamic risk management activities in financial statements, especially for banks managing interest rate risk in open portfolios. However, they have several concerns regarding the proposed Portfolio Revaluation Approach (PRA) and suggest that further clarification and safeguards are needed.

Main Views

• Need for a Specific Accounting Approach
  The EBA agrees that a specific accounting approach is needed to reflect dynamic risk management in financial statements, particularly for banks managing net interest margin. They highlight that current standards, such as IAS 39 and IFRS 9, are not well-suited for open portfolios and may require amendments to better accommodate dynamic risk management.

• Challenges with Current Hedge Accounting
  The EBA notes that the application of current hedge accounting to dynamic risk management is complex and leads to a "patchwork" approach, which affects the understandability, comparability, and consistency of financial statements.

• Preference for Risk Mitigation Approach
  The EBA favors the risk mitigation approach over the dynamic risk management approach, as it aligns more closely with the entity's risk management strategy and is more consistent with IFRS 9 principles.

• Operational and Conceptual Concerns
  The EBA raises concerns about the operational complexity and potential for earnings management under the PRA, especially when using behavioral assumptions or customer-specific data. They stress the need for appropriate guidance, documentation, and disclosure to ensure faithful representation and comparability.

• Eligibility Criteria and Disclosures
  The EBA supports the introduction of eligibility criteria and documentation requirements for items included in a hedging relationship under the PRA. They also emphasize the importance of adequate disclosures to enable users of financial statements to understand the impact of dynamic risk management.

Key Issues and Recommendations

Dynamic Risk Management

• The EBA believes the description of dynamic risk management in the DP is too broad and does not fully capture the nuances of the practice.
• They support the inclusion of certain aspects of dynamic risk management in the financial statements but caution against reflecting all elements, such as the Equity Model Book.
• The EBA suggests that eligibility criteria should be introduced to ensure that only relevant transactions are included in the PRA.

Pipeline Transactions and EMB

• The EBA is concerned about the inclusion of pipeline transactions in the PRA due to potential inconsistencies with the conceptual framework.
• They also question the inclusion of the Equity Model Book (EMB) in the PRA, as it may not align with the definition of equity.
• The EBA recommends that core demand deposits be shown at the amount due, with hedge revaluation adjustments presented separately.

Prepayment Risk and Behavioral Assumptions

• The EBA supports the use of behavioral assumptions in the PRA for managing prepayment risk.
• They caution against the recognition of changes in behavioral assumptions in profit or loss, as this could lead to earnings management.

Bottom Layer and Proportion Approach

• The EBA acknowledges that both the bottom layer and proportion approaches may be consistent with risk management practices.
• They emphasize the need for robust and consistent application of these approaches, including appropriate documentation and disclosure.

Risk Limits and Core Demand Deposits

• The EBA is concerned that reflecting risk limits in the PRA could lead to counterintuitive results and affect comparability and auditability.
• They recommend that core demand deposits be shown at the amount due, with hedge revaluation adjustments presented separately.

Sub-Benchmark Instruments

• The EBA suggests that sub-benchmark instruments may be included in the managed portfolio based on their relevance to the entity's risk management activities.
• They note the need for appropriate accounting treatment of the embedded floor in such instruments.

Revaluation of Managed Exposures

• The EBA supports the revaluation approach to the extent that it is consistent with the purpose of the macro-hedge model.
• They emphasize the importance of using external market prices over internal transfer prices to ensure comparability and reduce the risk of manipulation.

Transfer Pricing Transactions

• The EBA believes that transfer pricing transactions should not be used as a basis for applying the PRA, as they may not provide a faithful representation of the managed risk.
• They highlight the need for reasonable, verifiable, and comprehensive funding indices and caution against the use of entity-specific parameters that could impair comparability.

Selection of Funding Index

• The EBA does not support the use of a single funding index for all dynamically managed portfolios, as it may not reflect the entity's actual financing structure.
• They believe that multiple funding indices can be used as long as they are reasonable and verifiable.

Pricing Index and Operational Feasibility

• The EBA supports the use of a pricing index in the PRA but emphasizes the need for appropriate criteria to determine its use.
• They note that the PRA should provide useful information about dynamic risk management activities when a pricing index is used, but this requires clear guidelines and sufficient disclosures.

Scope of Application

• The EBA prefers a scope focused on risk mitigation rather than dynamic risk management.
• They believe that a narrower scope would improve consistency with IFRS 9 and reduce the risk of earnings management.
• They suggest that the IASB should consider the interaction between the PRA and IFRS 9's general hedge accounting model.

Mandatory or Optional Application

• The EBA does not express a clear opinion on whether the PRA should be mandatory or optional, but they note that a mandatory application could reduce the "patchwork" approach to accounting standards.
• However, they caution that a mandatory application may not be feasible due to differences in risk profiles and strategies across banks.

Conclusion

The EBA encourages the IASB to further develop its proposals for reflecting dynamic risk management in financial statements, while also considering alternative solutions such as amendments to existing standards. They stress the importance of guidance, documentation, and disclosure to ensure the faithful representation and comparability of financial information under the PRA.