Corporate Counsel Daily, ABA backs FASB hedge-accounting proposal for HTM, SOFR, net investment hedges, (Aug 19, 2026)

By Charles A. Menke, J.D.

The association also urged prospective transition, early adoption, and expedited finalization of amendments it says would align financial reporting with risk-management practices.

The American Bankers Association (ABA) told the Financial Accounting Standards Board (FASB) that it strongly supports proposed Topic 815 hedge-accounting amendments addressing held-to-maturity (HTM) debt securities, the Secured Overnight Financing Rate (SOFR), and net investment hedging instruments. In an Aug. 17, 2026, comment letter, the ABA said the Exposure Draft would remove unnecessary constraints on hedging and make accounting treatment better reflect institutions’ risk management activities.

The ABA characterized the Exposure Draft as a group of isolated solutions rather than a reconsideration of the broader hedge accounting model. The organization said the proposed amendments would matter most to institutions that manage interest rate risk in securities portfolios, use SOFR-based instruments to hedge benchmark interest-rate exposure, or use cross-currency swaps to manage foreign currency risk tied to net investments in foreign operations. The ABA added that the changes would remove accounting constraints that may discourage economically sound risk management strategies.

For HTM securities, the ABA supported removing the prohibition on designating interest rate risk as the hedged risk in both fair value and cash flow hedging relationships. The ABA said banks often hold debt securities for asset-liability management, and HTM classification does not eliminate exposure to rate changes. The current prohibition, the ABA said, can create unnecessary tension between sound risk management and accounting classification decisions. The proposal would eliminate that disconnect and reduce the mismatch between accounting outcomes and underlying risk.

The group also supported FASB’s proposed amendment to the SOFR benchmark interest rate definition. Permitting any tenor of SOFR to qualify as a benchmark rate would better reflect market use of SOFR-based instruments, including banking organizations’ use of different SOFR tenors, reduce complexity in effectiveness assessments, limit avoidable discontinuance of hedging relationships, and promote consistency between accounting and actual risk-management practices, the ABA said.

The ABA similarly backed expanding eligible net investment hedging instruments by permitting certain float-to-float cross-currency swaps with different reset dates. The current requirement that both legs of a swap have the same repricing intervals and dates can preclude hedge accounting for instruments that the ABA described as economically effective and commonly used to manage foreign currency exposure. The ABA said the amendment would help entities align hedge accounting with risk management without compromising model discipline.

The ABA supported a prospective transition approach and said early adoption should be permitted. The group encouraged FASB to finalize the amendments expeditiously.

Companies: American Bankers Association

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