How IBOR transition is both an opportunity and a threat

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4 minute read 15 May 2019
Authors

Shankar Mukherjee

Ernst & Young – United Kingdom Financial Services Advisory Partner

Banking & Capital Markets transformation leader. Passionate believer in the ability of better risk management to drive business growth.

Simon Woods

EY EMEIA IBOR Transition Lead

Senior advisor to board level executives in financial services. Business leader within EY. Industry thought leader. Passionate about having the courage to challenge conventions and foster innovation.

4 minute read 15 May 2019

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EY IBOR transition leaders Shankar Mukherjee, Simon Woods, Patricia Tay, Janina Polo and Anthony Kirby discuss the impacts and opportunities arising from the IBOR transition.

Benchmark reform is high on the agenda for financial institutions, and the upcoming transition from Interbank Offered Rates (IBORs) to Alternative Reference Rates (ARRs) tops the list.

There’s a growing sense of urgency among financial services firms to act after the recent announcement by the UK’s Financial Conduct Authority (FCA) that companies need to end their reliance on the London Interbank Offered Rate (LIBOR) by end of 2021.

EY IBOR transition leaders Shankar Mukherjee, Simon Woods and Anthony Kirby discuss the impacts and opportunities arising from the IBOR transition.

The next steps for IBOR transition

In this video, Shankar looks at the next steps that banks must take as part of the IBOR transition. He begins by looking at the likely scenarios post-transition and the implications of each.

Shankar also explores the possibility of intermediate benchmarks that could be used as part of the transition process and the timings of transition by different segments of the market.

IBOR transition: impacts for global markets

In this video Shankar looks at what is driving IBOR transition – in particular, the EU Benchmark Reform initiative and the IOSCO principles. A key challenge that banks face is that the transition could potentially happen at different times for different currencies and products.

He also looks at the potential for fragmentation of global capital markets as a result of the transition. Finally, Shankar explores the operational challenges that banks face as they tackle the transition.

IBOR transition opportunities

In this video Simon discusses how IBOR transition doesn’t have to be another regulatory-driven change program but could also be an opportunity for banks to move toward a lower cost, digital operating model.

He also looks at new product opportunities, particularly in the area of derivatives, where first-movers can benefit from taking a strategic approach to IBOR transition.

IBOR transition considerations for insurers

Simon Woods looks at how IBOR transition impacts insurers, how this differs from what banks are doing and what insurers are doing to make the transition a success. He covers the concerns that insurers currently have and what EY teams are doing to help insurers deal with the transition in the most effective way.

IBOR Asia-Pacific perspectives

In this video Patricia gives an Asia-Pacific perspective on IBOR transition, including looking at which markets are the most advanced, the areas where the approach differs from the US and Europe and what the implications are for banks in Asia-Pacific.

IBOR fallback language

In this video Janina explains fallback language and why it is central to the discontinuation of IBOR, and the adoption of new reference rates. She also gives an update on what progress is being made to agree an industry-wide approach and looks at ways banks can more efficiently change fallback language using technology solutions.

How asset managers can prepare for IBOR

In this video, Anthony looks at which parts of the asset management industry are most advanced with their planning for IBOR transition. He explores the options for replacement benchmarks, where the biggest impacts will be and what firms are doing now to prepare for the transition. Importantly, Anthony also covers who we expect to be bearing the costs associated with IBOR transition and the role vendor solutions might play.

Summary

Benchmark reform is high on the agenda for financial institutions, but how can firms prepare for the IBOR transition and what are the opportunities it presents?

About this article

Authors

Shankar Mukherjee

Ernst & Young – United Kingdom Financial Services Advisory Partner

Banking & Capital Markets transformation leader. Passionate believer in the ability of better risk management to drive business growth.

Simon Woods

EY EMEIA IBOR Transition Lead

Senior advisor to board level executives in financial services. Business leader within EY. Industry thought leader. Passionate about having the courage to challenge conventions and foster innovation.