Hedge Accounting Update: Portfolio Layer Method

On May 5th, the Financial Accounting Standards Board (the “FASB”) released their proposed Accounting Standards Update to the Last of Layer hedge strategy. Previously, financial institutions could only protect a portfolio of prepayable assets with a single static hedge. However, under the FASB’s proposed “Portfolio Layer Method,” institutions will finally be allowed to dynamically hedge their prepayable portfolios with multiple hedges – significantly improving the strategy’s effectiveness.