What is LIBOR?

The London Inter-bank Offered Rate is an interest-rate average calculated from estimates
submitted by the leading banks in London.

Each bank estimates what it would be charged were it to borrow from other banks. The resulting rate is usually
abbreviated to Libor or LIBOR, or more officially to ICE LIBOR.

Why Does it matter?

It has an effect on all borrowing across multiple financial instruments:

What was the LIBOR Scandal?

The Libor scandal was a series of fraudulent actions connected to the Libor (London Interbank Offered Rate) and the resulting investigation and reaction. The Libor is an average interest rate calculated through submissions of interest rates by major banks across the world.

Why is LIBOR a Problem for Financial Services Organisations

The London Interbank Offered Rate (LIBOR) is being replaced. Currently the benchmark for over US$350 trillion in financial contracts worldwide, the impact of the transition from LIBOR will be far-reaching for financial services firms,businesses and customers alike.

This means that a wide range of financial services that base their contracts and financial agreements on the LIBOR rate will be invalid after 31st of
December 2021. All documentation will need to be re-written or edited so that it will comply with the new terminology which is SOFRA (USA) and SONIA (UK)

A large number of contracts that reference LIBOR extend beyond 2021. Renegotiation is likely to be costly and resource intensive, and more
importantly may create financial gain for one party, leading to conduct risk and future litigation. Compounding this issue is that fact that fallback
provisions in contracts are mostly inadequate, and do not often envisage a situation where LIBOR is permanently discontinued.

Who in the Organisation will be affected by LIBOR?

Legal and Compliance Teams will play a key role in terms of the contractual understanding and arrangements however, other departments will be affected such as:

C Level Executives
– CEO / CFO / COO / CTO

Directors – Finance / Operations /
Information Technology / Compliance  /
Security / Risk

Managers – Finance / Operations /
Information Technology / Compliance  /
Security / Risk

LIBOR Teams – Are getting assembled today in Procurement / Recruitment / HR

What do organisations need to do?

There are 3 main options after an organisation has Identified the scope and size of the issue:

  • Wait for the contract to terminate
  • Re-negotiate and Re-Write the terms of the orginal contracts and the republish the contract
  • Agree new contract terms.

What is ONQU doing?

ONQU has teamed up with market leading and best of breed providers in document interrogation/classification and combined it Robotic Process Automation (RPA).

This will allow technology to undertake the heavy lifting in identifying ‘at risk’ documents and then automate the selection and classification of the documents without the need to employ large teams of people.

Resources and Background Reading

LIBOR – Articles and Webinars

These resources help organisations the scale and complexity of the LIBOR Change problem:

Bank of England – LIBOR Position (June 2019)

Bank of England – LIBOR Information (June 2019)

Risk Management Association LIBOR Timeline (June 2018)

TFA Geeks – The End of LIBOR (Spetember 2018)

Forbes – is LIBOR similar to Y2K (October 2018)

Economist – Regulators say drop LIBOR before its too late (June 2019)

Intralinks – Managing the LIBOR Transition (September 2019)

Webinar

Intralinks Webinar Sign Up

Altegroup – You cant trace time LIBOR (October 2019)

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