Ally, Capital One Among Banks Backing New Hedge Accounting Plan

Banks including Ally Financial Inc., Capital One Financial Corp., and Wells Fargo & Co. support a U.S. accounting rulemaker proposal to help more financial institutions use specialized accounting to reduce swings in their earnings.

The proposal would expand the number of common interest rate risk management techniques that qualify for hedge accounting, a special accounting method that uses derivatives to offset the risk of a potentially volatile financial transaction. These complex maneuvers help banks manage exposure to up-and-down interest rates, mitigating a big shift in earnings.

Firms are subject to strict rules to qualify for hedge accounting, and the Financial ...