The International Accounting Standards Board (IASB) has recently published a new proposal on Risk Mitigation Accounting (RMA), and it is already gaining attention across banking, particularly for asset and liability management (ALM) and interest rate risk teams.
What is Risk Mitigation Accounting?
Risk Mitigation Accounting (RMA) is a proposed new accounting model designed to better reflect how companies manage interest rate risk, especially on a portfolio or “net” basis. Under current IFRS 9 rules, hedge accounting typically focuses on relationships between individual instruments. However, many financial institutions manage risk across entire portfolios, not one contract at a time. The RMA proposal aims to close that gap.
Why is the IASB introducing RMA?
The main issue is a mismatch between:
- how risk is managed in practice, and
- how it is reported in financial statements
Banks and similar institutions often use dynamic strategies to manage interest rate exposure across loans, deposits, and derivatives. Existing accounting rules do not always capture this clearly. The proposed RMA model is part of the IASB’s broader effort to improve reporting for dynamic risk management.
What does the proposal include?
At a high level, the RMA model would:
- Allow companies to reflect risk mitigation at a portfolio level
- Provide an alternative to traditional hedge accounting
- Introduce new disclosure requirements about risk management strategies
- Be optional, similar to existing hedge accounting approaches
The focus is particularly on net repricing risk, which is central to asset and liability management (ALM).
👉 You can read the full IASB Exposure Draft here:
https://www.ifrs.org/content/dam/ifrs/project/dynamic-risk-management/ed-iasb-2025-4-risk-mitigation-accounting-ifrs9-ifrs7.pdf
Why is this relevant now?
The IASB’s consultation is currently open, which means the proposals are still subject to change. For banks and financial institutions involved in interest rate risk management, this is an opportunity to:
- understand how the model could apply in practice
- assess potential operational impacts
- consider whether to engage in the consultation process
What should banks and financial institutions be thinking about?
Even at this early stage, there are a few key questions to consider:
- Does your organization manage interest rate risk at a portfolio level?
- Would the proposed model better reflect your internal risk view?
- What would be required to support this from a data and systems perspective?
- Are there operational or cost challenges that should be raised in the consultation?
Final thoughts
The IASB’s Risk Mitigation Accounting proposal is still under consultation, but it signals a clear direction: moving closer to how risk is actually managed in practice.
For firms involved in ALM and interest rate risk management, this is worth paying attention to now, not later.