Libor Reform Threatens Hedge Accounting for Loans

Jun. 21, 2019
Nazneen Sherif, Risk.net 
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.
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.