ISDA Fallback Protocol for Derivatives: Key Release Details
The eagerly anticipated ISDA IBOR Fallback Protocol was released on Friday, October 23, 2020. The effective date of the protocol has been set for January 25, 2021.
The GTreasury Blog
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Hedging for Financial Institutions – 2020 Update
The drop in rates in Q1 has increased the net cash payments on pay-fixed, receive-variable interest rate swaps and at the same time increased the derivative losses. What does this mean for your hedge accounting?
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Reference Rate Reform: Economics and Accounting Treatment Impacts
We always encourage hedgers to consider the economics of a transaction before looking at the accounting. If the economics don’t make sense, it doesn’t matter how favorable the accounting treatment is, it probably isn’t a good idea!
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LIBOR Transition: Assessing Indirect Valuation Impacts
The direct impacts of the transition away from LIBOR to the use of an alternative reference rate such as the Secured Overnight Financing Rate (SOFR) have been well publicized. ISDA and ARRC have been releasing regular updates and suggested fallback language to determine how LIBOR rates will be replaced in derivative and loan agreements, once LIBOR is no longer available.
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LIBOR to SOFR Transition: Are You Prepared for the Shift?
While the derivatives market had been changing fairly rapidly prior to COVID-19, 2020 market dynamics have not closed the gap between expected and observed market prices. It’s critical that corporations and institutions address the coming reference rate changes related to their derivatives and debt instruments tied to LIBOR.
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5 Balance Sheet Hedge Challenges That Create Risky Positions
Once a company establishes a balance sheet program, it likely runs on auto-pilot from then on. Exposures are gathered, forecasted, netted, hedged and adjusted inter-month, and the results of the program are reported — but rarely is there a “review” of the hedge program from top to bottom.
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What to Watch for as LIBOR Fades Into History
Businesses mired down by the impacts of COVID-19 are facing enough difficulties. But the march to LIBOR’s end has continued unabated.
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SOFR: Key Characteristics & Hedge Accounting Impacts
As many of our readers already know, SOFR (Secured Overnight Financing Rate) has been selected by the Alternative Reference Rates Committee of the Federal Reserve to replace LIBOR in 2021.
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Top Benefits & Limitations of FX Hedge Programs
To implement a successful hedge program, it’s important that all parties involved know exactly what the hedge program will provide. This prevents disappointment and level sets expectations with management.
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Last-of-Layer Hedging for Financial Institutions
Lenders such as banks, mortgage lenders, and credit unions manage large portfolios of fixed-rate loans. Typically, these assets are funded with floating-rate liabilities. This mismatch between fixed-rate assets and floating-rate liabilities can cause unwelcome earnings volatility.
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6 Translation Accounting Nuances You Should Know
The translation process converts local currency financial statements of subsidiaries into USD based financials for consolidation and reporting purposes.
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Leveraging Cross Currency Net Investment Hedges to Boost Earnings Through Interest Income
Using a Net Investment hedge strategy to boost income has been around for decades, but the ultra-low interest rate environment in Europe combined with the new rules under ASU 2017-12 has renewed curiosity in this approach.
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Cash Flow Hedging Made Easy for the Urgent Hedger
Do you need to implement a cash flow hedge program quickly — either due to urgent management directives, Board member mandates, or competitive pressures? It happens all the time, leaving treasurers and decision-makers to scramble to come up with the right solution.
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Special Hedge Accounting: Why Functional Currency Matters
A common misconception is that if you have a foreign currency transaction, you can simply hedge it and apply special hedge accounting.
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Interest Rate Risk: Hedging Future Issuance of Fixed Rate Debt
Companies that need to refinance their debt do not have to wait until they refinance to lock in their interest rate on new issuances.