ABA Letter to FASB on Hedge Accounting (Topic 815)

Dear Mr. Day:

The American Bankers Association (ABA) welcomes the opportunity to comment on Proposed ASU on Derivatives and Hedging (Topic 815) Hedge Accounting Improvements ("the Exposure Draft," or "ED"). Representing both preparers and users of financial statements, we appreciate the Board's multiyear efforts to respond to ongoing stakeholder feedback initially expressed toward the Board's 2017 Accounting Standards Update on hedge accounting. This ED is the most recent of several updates that are intended to simplify hedge accounting and expand the circumstances in which hedge accounting can be applied. The Exposure Draft seeks to more closely align hedge accounting with the economics of an entity's risk management activities. Specifically, the ED addresses five issues:

• Similar Risk Assessment for Cash Flow Hedges
• Hedging Forecasted Interest Payments on Choose Your-Rate Debt Instruments
• Cash Flow Hedges of Nonfinancial Forecasted Transactions
• Net Written Options as Hedging Instruments
• Foreign-Currency-Denominated Debt Instrument as Hedging Instrument and Hedged Item (Dual Hedge)

ABA is generally supportive of the proposed changes in the ED. However, we also believe the requirement to dedesignate the hedging relationship if one or more hedged risks are no longer similar does not align with the objectives of the proposed update. This treatment, which would normally result in asymmetrical income statement volatility, thus providing unintuitive results that do not reflect the economics of the specific risk management activities.

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