We are delighted to share with you to the latest virtual event in collaboration with the Scottish Investment Operations (SIO), “Operational Readiness in the IBOR Transition”, which took place on Thursday 24th September.

The Operational Readiness component of the IBOR transition is one of the biggest challenges facing banks and financial institutions. It involves increased costs and risks for financial firms, as it requires updates to market risk profiles and models, valuation tools, product design, hedging strategies, and associated technology.

Both buy-side and sell-side have calculated their exposures by compiling inventories of products, contracts, and processes relying on benchmarks such as IBOR, EURIBOR and EONIA. The industry-wide transition away from these IBOR benchmarks accordingly threatens the validity of these calculations. 

From an operational perspective, most of the industry is taking a split approach to ensure they are ready for the transition, separating implementations between cash and derivatives, and by currency.

While logistically efficient, this adds operational and basis risk - and accordingly may trigger accounting issues if hedging products are no longer considered effective.

The discussion addressed topics pertinent to:

  • New product review and approval
  • Financial/non-financial exposure
  • Technical readiness
  • Communication strategy
  • Production readiness

Panellists included:

• Murray Longton, Principal Consultant, Capco
• Lia Oyman, Market and Regulatory Initiatives Manager - Operations, Franklin Templeton
• Roland Inglis, Executive Director & Head of Scotland, Capco
• Sarah O’Callaghan, Principal Consultant, Capco