IBOR Transition Services
Turning challenges into opportunities
Moving from unified IBOR to multiple ARR (Alternative Reference Rate) solutions is both an opportunity and a threat to financial organisations. The opportunity is that a clean, well-managed IBOR transformation will enable organisations to take advantage of the possibilities that arise from changing one of the foundations of current financial markets. The threat is that a poorly managed, lagging transition will at best cost a firm market share and at worst incur significant regulatory attention and intervention. At Delta Capita, we offer a range of services to accelerate delivery for a successful transition.
A successful IBOR transition requires a complex transformation plan and active controls to resolve the major hurdles. Regulators are challenging banks to evidence transition programme progress. Detailed plans need to be in place to develop replacement ARR-based products to remain competitive, as well as to resolve the substantial back-book of legacy transactions that do not have effective fallback or trigger provisions ahead of the hard deadline of year-end 2021.
With regulatory pressure is rising, organisations should:
- Transition as much of the back book as possible, as soon as possible.
- Expect increased regulatory scrutiny and regulatory capital costs if plans do not measure up.
- Ensure that their plans do not lag those of equivalent organisations.
- Watch out for conduct risk, with emphasis on education.
- Be aware that derivatives contracts carry the highest value, but ISDA has this covered. The real problem lies with everything else that uses trigger and fallback clauses, in particular, the USD 100-million loan book with no means of including a transition clause.
How Delta Capita can help
At Delta Capita, we offer a range of services to accelerate delivery across these areas:
- Programme Design & Governance
Most banks have initiated pockets of activity on IBOR, in many cases on a federated basis, focusing on the more obvious activities. In many cases, the group-accountable executive has limited visibility into the programme status or a complete view across all delivery areas at risk. Delta Capita has vast experience in supporting global programme design and governance functions for tighter controls, reporting and budget-oversight.
- Delivery – PMO and Project Management
The data needed to understand completeness, run rate, costs and risk management requires aggregation across multiple products, functions, operating units, geographies and transition teams. Delta Capita has an agile, easy-to-deploy, cloud-based PMO and project management solution. It integrates with legacy project and timesheet applications to manage day-to-day execution in one place, in real-time. This approach streamlines and vastly simplifies the PMO office across such a broad topic for timely and complete reporting to regulators.
Additional Service Capabilities
- Risk and Quant Analytics
There is a requirement to model the potential outcome scenarios as the new ARRs become more liquid and new products are created. This modelling needs to be reflected in group risk models (analysis of curves, convexity and portfolio impact analysis), by client segment and product. Delta Capita has an innovative new model and risk methodology that can provide the risk and model validation outcomes identified. Additionally, banks have identified divergence and contract risk between signed agreements and transactions captured in books and records. Delta Capita’s ‘Valuation Delta’ approach addresses this risk.
- Contract Digitisation, Analysis and Repapering
Delta Capita’s insight supports bulk contract digitisation and extraction of economic terms to reconcile against books and records. The outcome is clear exposure and risk information that can be presented in a dashboard for management reporting. As a quick-to-deploy model, the solution can provide rapid time to value.
- Conduct Risk
The BoE and PRA have highlighted the need for controls on client advisory and impacts of the new ARRs. To help avoid conduct risk exposure, Delta Capita can help with a full audit trail and governance process, which is needed to capture and report on all external communication in order to de-risk the messaging model.
MEET THE TEAM