The International Accounting Standards Board (IASB) is developing a new hedge accounting model under IFRS 9, known as Risk Mitigation Accounting (RMA), previously known as Dynamic Risk Management (DRM). This model aims to better reflect how financial institutions manage interest rate risk dynamically across portfolios. It represents a significant evolution in hedge accounting, particularly for macro hedging strategies, and is designed to align accounting more closely with actual risk management practices.
RMA provided a framework for designating portfolios of financial assets and liabilities in hedging relationships, supported by enhanced disclosures that explain the impact of risk management on financial performance. This new model is expected to replace or complement existing hedge accounting approaches under IAS 39 and IFRS 9, offering greater flexibility and transparency. The exposure draft for RMA has been released by IASB in December 2025.
What is Risk Mitigation Accounting?
Risk Mitigation Accounting is a proposed enhancement to IFRS 9’s hedge accounting models. It captures the evolving nature of interest rate risk management, particularly in open portfolios where exposures shift frequently. The RMA model seeks to close the gap between risk management and accounting, enabling institutions to more accurately reflect their hedging strategies in financial statements.
In this proposed framework, hedged items can be designated on a net basis and may include future transactions and core demand deposits, offering more flexibility than current IAS 39 requirements. A notable innovation is the use of risk limits aligned with economic metrics that banks actually use to manage their net repricing risk exposure, with fair value changes recorded as a 'risk mitigation adjustment' on the balance sheet.
This approach enhances transparency, improves comparability across institutions, and supports more meaningful financial reporting aligned with actual risk management practices. Key elements of the RMA Model include:
- Risk management strategy: Entities must identify and document risk limits for repricing risk in each repricing time band and specify the mitigated rate(s)—the benchmark interest rate used to manage repricing risk. The RMA model doesn't prescribe specific risk management metrics. Entities might focus on stabilising net interest income (earnings perspective) in some time bands and protecting the fair value of financial assets, liabilities, and future transactions (economic value perspective) in others.
- Net repricing risk exposure: Previously known as the ‘current net open risk position’, this is the net exposure to repricing risk, before risk management activities, arising from an entity’s underlying portfolios managed on a net basis. It's determined based on the mitigated rate.
- Risk limit: Previously referred to as the ‘target profile’, these are the thresholds for levels of repricing risk that the entity is willing to accept.
- Risk mitigation objective: Previously called the ‘risk mitigation intention’, this is the absolute amount of repricing risk the entity intends to mitigate, as outlined in its risk management strategy. The actions taken to mitigate repricing risk by entering into designated derivatives are the most relevant evidence of the entity’s risk mitigation objective.
- Benchmark derivatives: The risk mitigation objective is represented by benchmark derivatives, which are theoretical derivatives constructed to replicate the timing and amount of repricing risk specified in the risk mitigation objective. These are set to have an initial fair value of zero, based on the mitigated rate.
- Designated derivatives: Interest rate derivatives (linear and non-linear) used to mitigate repricing risk on a net basis (except net written options), unless their fair value changes are dominated by the effect of risks unrelated to changes in the mitigated rate, such as credit risk. Only derivatives with external counterparties are eligible to be designated.
Why act now?
Although the final standard is not expected in 2026, institutions should begin preparing now. The IASB Exposure Draft was released in December 2025, with comments due by July 2026 and field test results expected by November 2026.. Early engagement allows time to assess the potential impact, align internal processes, and avoid rushed implementation. Starting now also enables organisations to influence the direction of the standard through feedback and pilot studies, while building internal awareness and readiness across finance, risk, and technology teams.
How PwC can support you
PwC is actively supporting clients in preparing for the transition to the RMA model. Our Macro Fair Value Hedge Accounting proposition combines deep technical knowledge with hands-on implementation experience to help you navigate this change with confidence.
- Impact assessment and roadmap development – Together with you we analyse the potential effects of RMA across policy, governance, processes, systems, data, controls, and people. This includes assessing implications for P&L, IFRS reporting, regulatory capital, and disclosures, and developing a tailored roadmap to guide your transition.
- Field testing and pilot support - We work with you to design and carry out field tests for the proposed RMA model. This approach offers insights into how it operates, what data it needs, and its accounting effects. By gaining this hands-on experience, you can confirm your assumptions, spot challenges early, and share informed feedback with the IASB by 30 November 2026.
- Policy and strategy alignment – We collaborate with you to develop or refine hedge accounting policies, establish governance frameworks, and align your risk management strategy with the requirements of the RMA model.
- Implementation support – We assist you with model development, validation, and monitoring to ensure your RMA framework is operationally effective and compliant.
- Quality assurance – We provide you with independent review and we challenge you throughout the implementation process to help ensure completeness, accuracy, and consistency.
- Managed service – We deliver scalable, ongoing support through a managed service model, leveraging automation and tooling to help you maintain compliance, monitor effectiveness, and respond efficiently to regulatory changes.
- Training and capability building – We enable your teams to gain the knowledge and skills needed to understand and apply the RMA model through tailored training sessions and workshops.
With PwC’s support, you can turn regulatory change into strategic opportunity—enhancing transparency, improving operational alignment, and building a future-ready hedge accounting framework.
