POLAR: Path of Least Accounting Resistance

December, 2014

Selection of the desired interest rate risk position and the corresponding transactions that can be used to broadly support a desired change in a financial institution’s interest rate risk position is critical, but unfortunately, only half the story. The next steps in the larger balance sheet risk management framework are to assess the accounting implications of each transaction and pursue the risk mitigating strategies that best accomplish the FI’s economic and accounting objectives. POLAR can help guide the FI to the simplest, most efficient, and accounting-friendly solution that has the desired impact on the FI’s interest rate risk position.

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