It was the era of bell-bottom jeans, wide ties, and long sideburns – the early 1970s – when the London Interbank Offered Rate (LIBOR) became the favored reference rate for establishing interest on commercial and consumer loans, securitized debt, fixed-income instruments, and debt derivatives. Now, as most market participants are well aware, LIBOR will cease to exist; however, the timeline of the cessation has shifted.
In a November 2020 joint statement from the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation, it was announced the LIBOR administration will “cease the publication of the one week and two month USD LIBOR settings immediately following the LIBOR publication on December 31, 2021, and the remaining USD LIBOR settings immediately following the LIBOR publication on June 30, 2023.”1
Essentials of preparation
While some milestones in the transition timeline have been adjusted due to the pandemic and many accounting questions are still being sorted out, the time is now for firms to prepare, to avoid being caught off guard by these looming deadlines. As noted in the joint statement, “failure to prepare for disruptions to USD LIBOR, including operating with insufficiently robust fallback language, could undermine financial stability and banks’ safety and soundness.”1 As part of this preparation, the Alternative Reference Rate Committee (ARRC) has compiled a thorough checklist of recommendations for buy-side firms navigating this transition that is worth reviewing.2
Since the decision to sunset LIBOR in favor of other reference free rates, the Geneva team has been at the table with the chief architects of the transition—the ARRC, the Loan Syndication and Trading Association (LSTA), and some of the largest financial institutions in the market. The team is actively engaged in discussions at the highest levels to help shape the LIBOR replacement provisions, advocating for our clients, and providing insights that will lead to workable solutions. More importantly, Geneva client priorities are the primary driver and determinant of the scope of the Geneva transition project.
Transitioning with Geneva: What we’re doing
Geneva, our portfolio management and accounting platform, is widely used by alternative investment firms, global asset managers, and fund administrators around the world. We understand the significant operational impact this transition will have on our clients’ workflows and are working in close collaboration with Geneva clients to help them identify their priorities, define their needs, and understand ARRC and LSTA guidelines. Even as the timeline for cessation is shifted, it does not change our development plan for Geneva. Particularly, as new issuances should cease usage of USD LIBOR at the end of this year.
Our solution development team has been working to:
- Translate our clients’ needs into functional changes and enhancements
- Enable a smoother transition for Geneva users
- Implement fallbacks and support new tradable debt issuance in the post LIBOR world
To support our clients and ensure operational and technology readiness with Geneva, our Geneva experts have assembled a guide for the LIBOR transition, as well as a dedicated Community page for clients to manage and prepare for this monumental transition.
In short, a successful transition for Geneva clients is our highest priority with an all-hands approach. Our development process is agile and collaborative which positions us to successfully meet this challenge. For more on the impact of this looming tidal wave and how Geneva can help, read Sea Change: Ensuring Operational and Technology Readiness with Geneva, or request a demo.
- Statement on LIBOR Transition. The Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation. (2020, November 30). Retrieved from: https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20201130a1.pdf
- Alternative Reference Rates Committee. Buy-Side/Asset Owner Checklist. (January 2020). Retrieved from: https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2020/ARRC_Buy_Side_Checklist.pdf