Dynamic risk management - Findings from EFRAG's 2016 outreach
The outreach was focused on the modelling of structural balances (i.e. demand deposits and equity) in the context of managing interest margins. It explores the range of practices employed by banks in modelling these balances.
The objective of these activities was generally described as stabilising net interest income. Some banks also aim to optimise net interest income.
The paper also provides some theoretical background to these activities and considers both the risk management and the accounting perspectives.
Although the focus of this outreach was on banks, EFRAG believes that any future solution for reporting the effect of dynamic risk management activities in the financial statements should be relevant for various industry sectors. The initial focus on banks is intended as a first step before broadening the scope.
The full publication can be found here.