Read our blog posts for the latest insights on what replacing the LIBOR rate could mean for your business. We’ve developed a flagship program management application that leverages AI infused automation to manage LIBOR program dependencies. By using the site, you consent to the placement of these cookies. These include a potential jump in borrowing costs, hedge ineffectiveness, and interest rate risk management.

If these large banks hold on to cash to meet their own needs instead of lending to smaller banks, this may crowd out liquidity to smaller banks and cause repo (and SOFR) rate volatility to increase and interest rates to skyrocket. Debt contracts may need to be renegotiated. Get a detailed view of the LIBOR Transition Plan, CCP discounting switch to new risk-free rates, How to build a contract remediation factory, Preparing for 2021 CCAR ahead of LIBOR cessation, Do Not Sell My Personal Information (for CA). The Accelerator then allows a financial institution to revalue a contract or set of contracts using alternative rates and valuation models, rapidly allowing an institution to quantify its exposure and potential gains and losses for a contract or book of business under various interest rate assumptions. By the end of 2021, LIBOR is expected to be phased out, which necessitates adopting a new interest reference rate, not just for new loan agreements but also for existing loans. ASC Topic 815, Derivatives and Hedging, requires discontinuing hedge accounting for terminated hedges, and a benchmark interest rate change could terminate the hedge.

Select to receive all alerts or just ones for the topic(s) that interest you most. To learn more about Synechron’s LIBOR accelerator and the work we’re doing, email us at, Retrieve, transform and analyze historical data sets in real-time, Fully automated and proactive customer complaints management, Enabling pro-active and informed investing decisions, Comprehensive solutions for sell-side and buy-side research analysts, A Synechron Accelerator for a Citi Advisory Services Concept. For example, rate-referenced interest also affects mortgages, automobile loans, credit cards, student loans, etc. Dramatic reduction of manual LIBOR impact assessment; whereby, for two analysts to manually review approximately 20-30 contracts/day, it would take 300-500 working days to review 10,000 contracts, The ability to automate a contract review for ~ 80% of necessary information with a high confidence level using the micro-model framework, Enhanced productivity making the overall contract review process 30x faster and reducing cost by 80%, Robust model confidence measurement for easy quality control and model improvements via an intuitive user interface, Enhanced business intelligence around the full impact of LIBOR alternatives with effective simulations of portfolio valuations in aggregate to minimize/hedge associated risks, Higher margins, accuracy and transparency, and more efficient operations, all of which empower firms to have more informed decision-making, Reduced manual error rate and improved regulatory compliance given aggressive regulatory deadline, Extracts label values and tables from each page using contours or bounding boxes, Master Labels with pre-defined data types. These transactions underpin nearly USD$200 trillion in outstanding volumes of USD LIBOR contracts. This will navigate you to Sign In page. Build a central contract database for all LIBOR contracts with the help of our legal and technology vendors, alliances and partners.

Create an integrated LIBOR transition strategy around product changes, client outreach, contracts and pricing. Following allegations of LIBOR manipulation, reform of LIBOR has been suggested, such as the confirmation of submissions on LIBOR against transaction data and the involvement of market participants in the surveillance of LIBOR. Read our privacy policy to learn more. And as a member of the Federal Reserve Board and the Federal Reserve Bank of New York’s Alternative Reference Rates Committee (AARC) in the U.S. and the Working Group on Sterling Risk-Free Rates in the U.K., among others, our approach is informed by the relationships we’ve established with key industry leaders. Valuation models may include an interest reference rate, and a rate change may impact discount rates. This became ASU No. Some debt contracts may contain interest-reference-rate "fallback" clauses that specify how to calculate reference-rate difference impacts. The Accelerator combines a powerful combination of Optical Character Recognition and Natural Language Processing to identify any reference to specific benchmarks (e.g. The London Interbank Offered Rate (LIBOR) may cease to exist after December 2021 and hence is being replaced. Examples are valuing debt or interest rate spreads affecting cash flow. In April 2018, the Federal Reserve began publishing SOFR as an alternative to USD-LIBOR. Industry reports take a closer look at LIBOR. FASB ASC Topic 815, Derivatives and Hedging, requires hedge effectiveness between the hedge and the hedged item, which is generally achieved when both have the same amount, term, and interest rate. Depending on existing LIBOR exposure, prudent risk management may necessitate establishing a task force to assess the impact of financial, operational, legal, technology, and other risks. Companies utilize interest rate swaps to reduce their risk exposure to asset and liability fair value changes or to cash flow risk exposure due to interest rate fluctuations. For example, companies should ensure that information technology systems can incorporate new financial instruments and rates with features that differ from LIBOR. Companies need to identify and inventory all contracts that contain interest reference rates to perform an impact assessment of LIBOR discontinuation.

These same terms are also used in FASB ASC Topic 820, Fair Value Measurement. Set out in three clear waves, each one has been designed with clear and defined actions that we’ll tailor to your business. An experienced and dedicated team of global LIBOR specialist to help orchestrate your transition. Finally, a change in benchmark interest rates could impact the required hedge effectiveness documentation, especially if the benchmark interest rate had insignificant market volume or market participants. The impact of the transition from LIBOR will be far-reaching and spread across industries globally as well as in India. The repo market is influenced by the concentration of large banks in the market. The three-wave approach allows necessary activities to be handled both sequentially and in parallel using data and analytics to effect a transition strategy, and facilitate business and infrastructure changes resulting in an efficient execution of a transition program. Yet, according to our 2019 LIBOR Survey only 20% of these businesses believe they are prepared for the change. Background . This will result in policy and procedure changes for credit underwriting, asset and liability management, interest rate risk, and accounting. IMPACT ON FINANCIAL INSTITUTIONS Institutions have to identify legacy contracts linked to Libor and carry out their vulnerability assessments, like fair value changes for foreign currency loans, impact on product prices like syndicated loan books, derivative contracts and hedges need to … We’ll undertake an in-depth analysis of front to back technology strategies to develop a transition plan that meets regulatory timelines. LIBOR) and data attributes contained in a contract and to return those results in a structured form. Learn how we can help you address your financial firm’s LIBOR challenges.


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