USD IBOR transition is coming

May 25, 2022

The market needs to act now on $IBOR reform

The transition away from Interbank Offered Rates (IBORs) and their replacement with ‘nearly’ risk-free rates (RFRs) is a shift so significant that it is difficult to think of a modern day analogy in capital markets.

The adoption of RFRs for non-USD currencies, which occurred at the end of 2021, required a large and co-ordinated effort on the part of institutions and their clients. Now, markets must prepare for the USD transition in June 2023 – a ‘big bang’ that, as a result of the sheer volume of transactions affected, represents a daunting body of work for a range of market participants.

There is a sense amongst many that the bulk of the work has already been done. The efficiency with which non-USD trades have been migrated seems to have lulled some institutions into a false sense of security. Many appear to believe that the foundations are now in place, and the USD transition will simply amount to a ‘scaling up’ of the non-USD work.

As we will see over the course of this dedicated series of articles, events, and publications, this is only half the picture. In fact, there are significant workstreams that many institutions are still struggling to progress with.


Computationally intensive, high-volume

The sheer volume of transactions affected means that the USD transition will far outweigh non-USD for most institutions. This means many more person-hours spent on manual exception handling, dealing with trades that do not transition smoothly.

Client Outreach

Additionally, institutions looking at IBOR reform are faced with the prospect of an onerous client outreach programme – something which many have traditionally found challenging. The facts of the transition and their implications for clients must be translated and explained. Additional action will be required on the part of some clients, and this has a time implication. Marketers must be briefed, and other client-facing functions will need to be properly prepared.

$IBOR Transition – Planning For Change

The $IBOR transition is a cross-functional challenge that requires buy-in throughout institutions. From regulatory point-people to IT teams, and from ops to marketing and communications, this is a piece of work that affects everyone.

As such, it presents a valuable opportunity to think about how financial institutions manage change. In industries as sclerotic as finance, and particularly in fields as complex and high-value as capital markets, change management tends not to be given anywhere near the attention it deserves or requires.

In this Financial Markets Insight series we will speak to a range of market participants and experts to explore the implications of the $IBOR transition and the work that needs to be done in order to comply in time.

But we will also consider the role of change management in capital markets, asking subject matter experts about how institutions can properly embed change management processes to make sure they are truly ready for IBOR reform.

$IBOR is a watershed event, and a crucial opportunity to build better knowledge about managing change in capital markets.

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