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Hedging Is Easier Than Ever – Should Credit Unions Take the Plunge?

CUs may find the hurdles that have traditionally kept them from reducing their risk exposure with derivatives have been knocked down.

By Christopher L. Moore | January 04, 2019 at 09:00 AM
Source: Crowe Analysis

Credit unions generally have shied away from using derivatives to hedge their exposure to fluctuating interest rates. New accounting guidance from the Financial Accounting Standards Board could make some of them reconsider their position.

Until now, most credit unions have found hedge accounting too daunting to pursue a derivative-based hedging strategy. FASB’s Accounting Standards Update (ASU) 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” simplifies hedge accounting and introduces a new mechanism for hedging pools of fixed-rate financial assets that should prove particularly appealing to credit unions.

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