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      What is RMA about?

      The IASB issued an Exposure Draft on Risk Mitigation Accounting (RMA) under IFRS 9 Financial Instruments (IFRS 9) in Q4 2025, with the aim of replacing IAS 39 Financial Instruments: Recognition and Measurement (IAS 39) macro hedge accounting.

      RMA represents a significant shift in accounting for interest rate risk, with the objective of bringing accounting outcomes closer to banks’ actual risk management activities.

      RMA introduces the following new concepts:

      • Net Repricing Risk Exposure (NRRE)
      • Risk mitigation objective
      • Benchmark derivatives as a measurement construct

      Key takeaway: RMA will be an operational change and not just an accounting change.

      Charlotte Lo

      Partner, Banking Accounting Advisory Services

      KPMG in the UK

      Uni Choi

      Partner, International Standards Group (ISG)

      KPMG in the UK

      Who will be affected by RMA?

      RMA will affect banks and entities with exposure to net repricing risk and established asset-liability management (ALM) frameworks.

      It is relevant for institutions currently applying IAS 39 portfolio (macro) hedge accounting as this guidance is expected to be withdrawn.

      The changes will impact:

      • Risk management processes and governance frameworks and ALM
      • Treasury Finance
      • Financial, statutory and regulatory reporting 

      Why is RMA being introduced?

      The current accounting requirements do not always reflect how banks manage interest rate risk in practice as certain entities have to apply proxy hedge designation and for entities in the EU / UK, adopt the carve-out to allow designation of hedges for financial instruments with demand features.

      RMA aims to:

      • Improve alignment between risk management and financial reporting
      • Provide more meaningful representation of economic hedging strategies
      • Address limitations of IAS 39 macro hedge accounting

      At the same time, industry feedback highlights that achieving this alignment may still be challenging in practice due to differences between regulatory, risk, and accounting requirements.

      RMA model: Key industry considerations

      While the RMA model introduces several enhancements, banks have identified a number of practical considerations regarding its application:

      Misalignment between IRRBB and RMA Perimeters

      Differences between the risk management perimeter (IRRBB/ALCO) and the RMA accounting perimeter may still impede alignment. This is because RMA permits only the eligible items to be included in the NRRE whereas a bank’s risk management may not have such restrictions as economic hedging is applied to items such as equity and intragroup funding. .

      Potential Accounting Effects

      Inclusion of FVOCI instruments in underlying portfolios may lead to double counting of interest rate effects on balance sheet (B/S) as there may be double counting of fair value changes attributable to interest rate movement via the risk mitigation adjustment and OCI remeasurement in OCI.

      Operational Complexity of Benchmark Derivatives

      • Construction of benchmark derivative (BD) with initial fair value of zero raises practical challenges.
      • Complexity in capturing the impact of unexpected prepayments on BD.

      Unclear Application of the RM adjustment (RM Adj) excess assessment

      • Lack of guidance in the ED on RM Adj excess assessment in relation to the following may result in inconsistent application:
        - Lack of clarity on indicators triggering a RM Adj excess assessment;
        - Challenges in determining the present value of NRRE for RM Adj excess assessment;
      • Unclear regulatory treatment for RM Adj.

      Implementation challenges & opportunities

      Key implementation challenges

      • Re-design of risk strategies, metrics and limits.
      • Governance realignment across Finance, ALM and Risk functions.
      • The need to assess the impact of RMA to existing proxy hedges may increase the involvement of SMEs.
      • Significant systems and data change required and increased efforts to calibrate models.
      • Assessment of day 1 and subsequent accounting for hedge accounting balances relating the hedging relationships that will be transitioned from to discontinued hedge accounting under IAS 39.
      • Assessing the impact of benchmark derivative constructed to have an initial fair value of zero at transition.

      Key implementation opportunities

      • Closer alignment of interest rate risk environment across:
        • Risk management
        • Financial reporting
      • Potential simplification of hedge relationships e.g. less proxy hedges.
      • Potential reduction in operational efforts to undertake hedge accounting and/or the opportunity to optimise and   automate hedge accounting operations.
      • Opportunity to optimise structural hedging.
      • Better long‑term alignment between economic risk and accounting outcomes.

      What you need to do now

      RMA has the potential to significantly reshape how banks report interest rate risk.

      While it offers the promise of improved alignment and more meaningful reporting, it will require:

      • Alignment across functions

        Close coordination between Treasury, ALM, and Finance (including Treasury Finance and Hedge Accounting) to ensure a shared understanding of the risk management strategy, structural hedging approach, and how RMA can be applied within existing ALM world.

      • Operational readiness

        Assessment of tools, systems, data, and resources to ensure they are fit for purpose and to identify any gaps or limitations.

      • Solution development and testing

        Development and calibration of an RMA solution aligned with the risk management strategy and agreed accounting assumptions, supported by robust lifecycle testing using trade simulations and stress scenarios. Outcomes should be continuously monitored to determine whether refinements to the strategy, accounting decisions, or underlying assumptions are needed.

      If you want to discuss this in more detail, please contact your usual KPMG account lead or one of our experts.

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