The Italian Accounting Standard Setter (Organismo Italiano di Contabilità – OIC) publishes its comment letters in response to:

• EFRAG Draft Comment Letter on the Exposure Draft – Risk Mitigation Accounting

• IASB Exposure Draft on Risk Mitigation Accounting – Proposed amendments to IFRS 9 and IFRS 7

In its response to the Exposure Draft on Risk Mitigation Accounting, the OIC recognizes the IASB’s efforts to better align accounting and risk management.

However, based on feedback received from banks and insurance companies, it concludes that the proposed model still presents significant technical and operational criticalities and, in its current form, is not ready to replace the IAS 39 “carve-out” framework.

Among the main critical areas highlighted are the scope of hedged portfolios, over-hedging by time band, the definition of unexpected changes, the treatment of benchmark derivatives, the excess test and, for the insurance sector, the presentation of the Risk Mitigation Adjustment and the definition of repricing risk.

The OIC therefore recommends further developments of the model and a new consultation phase prior to the finalization of the project.

Attached are the comment letters sent to EFRAG and the IASB.