Is your IBOR transition on track for 2021?

$400 trillion in legacy contracts

The London Interbank Offered Rate (LIBOR), and its derivates more generally referred as IBOR, became the de facto benchmark rate over the past 35 years. IBOR/LIBOR is at the heart of a wide spectrum of financial products worth over $400 trillion globally and range from derivatives to mortgages to credit cards.

Regulators globally are expecting financial institutions to transition to alternative reference rates by the deadline established by the FCA in 2021. The SOFR and SONIA rates have been established in the US and UK, respectively, as alternatives, and the transition is expected to represent one of the largest undertakings experienced by the markets in years, as contracts for millions of assets must be reviewed and updated.

Contracts covering both commercial and consumer products may be highly customized or relatively standardized across customers, creating a wide variety of remediation efforts across various lines of business in a typical institution. Adding to the complexity is the relatively low rate of contracts that have been fully digitized, with many residing in image repositories as unstructured data.

A big team alone is unlikely to meet the deadline

A typical approach to these types of remediation efforts is to deploy large teams of resources and work through the volumes with “brute force” often relying on inexperienced resources or incurring the cost of paralegals and attorneys. This approach is unnecessary, expensive, and fraught with risk.

Today, sophisticated technologies allow institutions to execute a hybrid approach using automation to complete the initial review of the full population of contracts to determine the scope and extent of any required remediation, and then utilize resources with the appropriate legal expertise to make a final judgment on complex cases. This approach produces both a lower rate of error and significantly reduced cost. Additionally, this automated solution provides strong, consistent review coordination and progress reporting through integrated workflow that allows independent legal, risk, compliance, and operational teams to interact seamlessly.

A hybrid solution to power your transition

We have developed, in conjunction with our strategic partner EvoluteIQ, a comprehensive solution to power your remediation efforts, including the following key capabilities:

  • Domain expertise: Specialists in relevant financial products across cash and derivatives, multiple standards and jurisdictions, and contract management need to be embedded in the transition program to ensure proper comprehension.
  • Integrated automation: AI-enabled, automated solution providing review and remediation processing for a variety of asset types within investment banks, hedge funds, commercial and retail banks, pension funds, insurance companies, asset managers, private equity and corporates. Solution can process thousands of contracts per day, for both complex and simple asset types including derivatives and ETD, securitized products, loans, mortgages and bonds, and is configured to support different jurisdictions and standards including ISDA and FBF.
  • Governance and change management: Experienced change management experts to establish an effective and efficient remediation process across the wide spectrum of stakeholders and counterparty teams, and support all required reporting protocols.

Top-5 bank case study

Large European bank with over 12,000 legacy contracts, projected to achieve significant benefits, including:

  • Reduction of remediation time from 21 months to only 5 months
  • Cost savings of over 65%
  • Increased remediation accuracy from 56% to 96%, and coverage rate from 60% to 100%
  • 80% reduction in technology & operations team

Our teams stand ready to evaluate your portfolio for deployment of this hybrid solution and assist you with the execution of an accelerated, high-quality remediation effort.