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Enabling a holistic solution to London Interbank Offer Rate repapering
Journal of Financial Compliance,
5
(1),
30-44
(2021)
Abstract
This paper examines the discontinuation of the interbank offered rates (IBOR) and explores how a holistic approach that utilises the right resources and processes for each step of preparing for the discontinuation can have a significant impact. At the end of 2021, IBOR is being discontinued (with the exception of certain US tenors that will discontinue in 2023), and with it will come a slew of changes in financial markets. Because of the discontinuation of IBOR and the necessary repapering process, there are a number of associated challenges that can arise, including matters related to compliance, data consistency and organisational alignment. This paper discusses the challenges associated with IBOR repapering as well as the issues that can and will arise from not being proactive in preparing for IBOR reform. Additionally, this paper discusses what goes into developing an effective workflow before it is enacted. Further, this paper takes a broader view on what the best practices look like for each step of the repapering process, including review, analysis, execution and engagement, as well as what an end-to-end repapering process will look like in 2021. As institutions prepare for the changes on the horizon, a smooth end-to-end repapering process is crucial as the financial markets brace for the discontinuation of IBOR, and it is important to look for ways to drive efficiencies, such as the utilisation of artificial intelligence (AI) technologies. For all parties impacted by the discontinuation of IBOR, this paper provides a detailed look on how to be prepared and what an efficient and effective preparation should look like from start to finish.
Keywords: IBOR; repapering; interbank offered rate; compliance; discontinuation; LIBOR; transition; ARRC; ISDA protocol
The full article is available to subscribers to the journal.
Author's Biography
Marcy Sharon Cohen serves as Managing Director and Chief Legal Officer to ING Americas, which has offices in the United States, Mexico, Brazil, Argentina and Colombia. Her responsibilities include managing the legal function; providing leadership, guidance and support to ING globally in major strategic initiatives, corporate governance, regulatory affairs, transactional matters and litigation; and serving as a member of the Americas Management Team, Risk and Compliance Committees, and ING Global Legal Management Team. Before joining ING in 2005, she held similar senior roles for other major global financial institutions. She currently serves as a Director and member of the Board of Trustees of the Museum of American Finance on Wall Street and is a member of the Board of Directors of the Atlantic Legal Foundation.
Christopher S. Schell is a partner in Davis Polk’s Corporate Department, practicing in the Derivatives and Structured Products Group. He regularly advises financial institutions on numerous types of domestic and international debt and equity capital markets transactions, as well as the London Interbank Offer Rate (LIBOR) transition. He represents issuers and investment banks. His practice includes advising financial institutions in connection with offerings of structured products, including numerous types of synthetic exchangeable securities and other equity, commodity and currency-linked products. He has extensive experience developing new financial products, including innovative offerings of units, warrants, exchange-traded notes and proprietary indexes, for both retail and institutional investors. He routinely advises on the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA) and other regulatory and transactional matters related to structured products, such as SEC comment letters, compliance projects and the impact of the Dodd-Frank Act.
Sirisha Gummaregula has been advising boards of directors, corporate legal departments and law firms on a variety of strategic matters for more than 25 years. As QuisLex’s Chief Operating Officer, she heads up teams of data analysts, Six Sigma black belts, process experts, statisticians, legal technologists and attorneys to design and implement tech-enabled and process-based solutions to solve her client’s most pressing issues in litigation, corporate, compliance and legal spend. She specialises in using a data-driven, silo-busting approach in devising bespoke solutions for clients and has helped them achieve significant savings across various industries. She has advised several financial institutions specifically in creating programmes to manage repapering projects in the industry over the years, including for Brexit, European Market Infrastructure Regulation (EMIR) Refit, Margin, initial margin (IM), London Interbank Offer Rate (LIBOR) and General Data Protection Regulation (GDPR). Before joining QuisLex, she was the Assistant General Counsel and Corporate Secretary for Quest Diagnostics, where she was responsible for all corporate legal matters and Six Sigma, and spent nine years at Shearman & Sterling, where she advised clients on M&A and corporate finance transactions.
Jason Pugh is Managing Director of D2 Legal Technology with over 25 years’ experience as a lawyer. As a banking litigator at Clifford Chance, he was sent on secondment to Morgan Stanley, which led to a 23-year career ‘in-house’ at major investment banks. He spent more than 15 years at Morgan Stanley, where, as a Managing Director, he became Global Head of the Legal and Documentation team across asset classes. It was during the financial crisis, when he was also responsible for all the counterparty closeouts in EMEA, he recognised the shortcomings in the documentation process and became passionate about the need for legal change. After a stint at Barclays evaluating the fallout from the alleged manipulation of London Interbank Offer Rate (LIBOR) and developing a Conduct Risk framework, he joined Deutsche Bank (DB). At DB, he was responsible for Global Product Governance and Structured Transaction oversight and was responsible for developing the three lines of defense framework in Operational Risk. He joined D2LT in February 2019 and is qualified as a lawyer in England and Wales. Jason, based in London, enjoys outdoor pursuits, including cycling and skiing; can be passionate about Welsh Rugby; and most of all enjoys spending time with his family.
