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Libor Transition

The London Inter-bank Offered Rate (LIBOR) has been the benchmark interest rate referenced by a wide array of products amounting to hundreds of trillions USD in gross outstanding notional, and is no longer guaranteed to be available after 2021.

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About LIBOR Transition

Manipulation scandals have diminished confidence in the legitimacy of LIBOR rates. This has led to The Financial Conduct Authority (FCA), which has regulated LIBOR since 2013, to announce in July 2017 that it will not compel or persuade banks to make LIBOR submissions after December 31, 2021.

This has prompted regulators and industry organizations across the globe to initiate efforts to find suitable replacements for the 35 different LIBOR rates spanning across 5 currencies and 7 terms (from overnight to 12 months).

Institutions must undertake organized efforts to realize an orderly transition over to the replacement rates being recommended by the appropriate groups in each region.

Global footprint of $370 trillion gross outstanding notional of instruments referencing LIBOR

Many outstanding questions with regards to identifying a suitable replacement

LIBOR is not guaranteed to be available after 2021

Millions of legal contracts are tied to LIBOR around the world

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Our Convictions

Stay Informed of Industry Developments

  • In order to maintain consistency with the methodologies being utilized throughout the industry, it is critical to be aware of recommendations and other guidelines being published by relevant regulators and industry associations.

  • In addition to consuming the outputs of such groups, they also serve as a platform to raise any perceived issues.

Be Prepared to Mobilize

  • The transition from LIBOR will require prolonged engagement from many functions within the organization.

  • Relevant stakeholders must be educated regarding the impacts of the change and be fully committed to seeing the transformation through.

  • This endeavor cannot be handled as a Business as Usual (BAU) matter, and will require appropriate project planning, resourcing, and decision-making in a timely fashion

Demand Creative Solutions

  • Robotic Process Automation (RPA) will make the difference between being overwhelmed by the volume of documentation to be amended and having a relatively uneventful transition.

  • Data analytics can provide a pivotal advantage in not only identifying the impacted contracts but also in facilitating the necessary revisions.

Be Pre-Emptive and Act Now

  • The industry is struggling to move forward with the transition given the many uncertainties still needing clarification.

  • The benefits of taking action now and preparing for all possibilities will far outweigh the financial costs associated with losing valuable time waiting for outstanding issues to be resolved.

The panic level arising from index reform has been compared to that of the biggest banking compliance projects, affirming the LIBOR transition as a once-in-a-generation challenge for the global banking community

Matthieu Courtecuisse - CEO, Sia Partners

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Our Services & Expertise

Our Services

SUBJECT MATTER EXPERTISE

Governance stand-up & organizational mobilization

Impact assessment

Real-time industry analysis

Comprehensive roadmap

 

BUSINESS TRANSFORMATION

End-to-end transformation inclusive of PMO

Contract management & remediation

Systems update / development

Operations, Risk, Accounting alignment with future state

 

AUTOMATION CAPABILITIES 

Audit automation of existing contracts

Fallback language automation of documentation reviews and amendments

Our Expertise

Sia Partners Financial Services practice is strategically located in all major financial hubs (New York, London, Hong Kong, Singapore, Paris) and our integrated model allows teams from different countries to easily work together. Sia Partners has developed strong competencies in CIB, retail banking, private banking, securities services, wealth management and specialized financial institutions.

Sia Partners is recognized as a leading consulting firm by Chief Financial Officers, Chief Risk Officers, Chief Operational Officers and human resource departments of top financial institutions. We guide their projects and initiatives through unparalleled industry expertise in strategy, business transformation, IT & digital strategy, and Data Science. As the pioneer of Consulting 4.0, we develop consulting bots and integrate AI in our solutions.

Analyze

• Perform an independent assessment of both quantitative and qualitative impacts.

​• Benchmarking against peers with regards to impact, preparation, and progress.

​• Articulation of strategic objectives, including targets for converting existing documentation.

Design

​• Designing of the target model where trades are booked and processed downstream using replacement rates.

​​• Perform gap analysis to identify processes needing to be enhanced to support the target model.

​​• Business cases can help define the approach and account for variances between products, businesses, and other criteria.

Plan

• Implementation planning for contract amendments, and new systems and processes.

• Budgeting for different phases of the project as well as estimation of total cost.

• Project governance structuring to identify impacted groups and assign roles and responsibilities

Execute

• Stakeholder coordination between all impacted groups to ensure appropriate engagement.

• Cross-functional delivery management to ensure that dependencies are known and addressed.

• Project tracking and reporting highlighting key risk areas and potential solutions.

Contact our LIBOR experts

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