LIBOR transition program

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SUMMARY

The client has asked Avantage Reply to support one of its subsidiaries in the group-wide LIBOR transition program. The goal of the project was to move the bank from a high dependency on the LIBOR reference rates to the Alternative Reference Rates (ARR), as defined by the different Working Groups in their respective currencies. A group-wide program was initiated by the bank to align and support various locations and business lines in their migration to a post-LIBOR world. Avantage Reply was mandated to support business lines in this transition, including project management, impact and exposure assessments, internal and external communication and accompanying IT implementation.

CUSTOMER GOAL

Due to the permanent discontinuation of the LIBOR reference rates in their current form and the extensive use of these rates in the global financial markets, the client had to transition their whole banking landscape away from LIBOR rates to ARRs, while considering the structural differences between legacy and successor rates.

CHALLENGES

Although the LIBOR cessation has been announced in 2017 and confirmed in March 2021, many regulatory uncertainties have remained during all of the project period. The uncertain regulatory expectations combined with the complex transition caused by the structural differences between LIBOR and ARR impacting operational, legal and conduct risk considerations resulted in a challenging environment. Additionally, the value transfer from the legacy to the successor rates and the corresponding P&L impact present a significant challenge for the bank.

SOLUTION

Avantage Reply supported the subsidiary of the bank in its LIBOR transition program, aligning local tasks to the group strategy while considering local particularities, e.g. the custody business and specific products. To start the assignment, Avantage Reply contributed to an end-to-end impact and exposure assessment, identifying LIBOR relations within the bank, including their impact on the IT environment – the basis for the migration strategy in later phase of the project.

Avantage Reply helped the client to establish a local plan for the transition and accompanied the migration process, including project management as well as regular exposure and impact assessments, which included legal risk, conduct risk and business risk. Additionally, our consultant was in charge of internal and external communication :

Promoting broader knowledge of LIBOR transition by various stakeholders within the organisation, e.g. the management body, front office staff and operational teams and
helping bank’s clients to understand the forthcoming changes and the impact of the LIBOR cessation on their banking products and investments.

Furthermore, Avantage Reply supported the product specialists in establishing alternatives to LIBOR instruments, ensuring regulatory compliance, fair treatment of customers and minor impact on the value transfer, i.e. the client’s P&L.

Business analysis and support with necessary IT implementations rounded up the broad task spectrum that Avantage Reply took on for the client.

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