What is the IBOR transition all about?
Interbank Offered Rates (IBORs), and especially the London Interbank Offered Rate (LIBOR), have been central to the global financial services industry for more than 40 years. But now, as part of global benchmark reforms, regulators and supervisors in the UK and US have set expectations that firms phase-out IBORs. After that, a new benchmark – known as Alternate Reference Rates (ARR) – must be used.
How can legal consultants play a role here?
As IBORs are so deeply embedded in the day-to-day activities of financial services providers, the transition to ARRs is one of the biggest transformation programmes many organisations have undertaken.
In response, organisations are expanding their transition teams globally with additional headcount and skillsets that can help them meet the upcoming deadline. Many are seeking top-tier legal consultants to support them in the process.
As one Peerpoint legal consultant explained, the sheer scale of transition projects makes participating in them a unique experience, “my assignment with a global bank saw me working on IBOR transition matters for the bank’s Asia Pacific (APAC) business lines, being a bridge between APAC country and product counsel and the bank’s other global central teams and stakeholders.”
“Given the international scale of the transition project, our strategy needed to be coordinated across all franchises, countries, product lines and businesses. And to prevent conduct risk issues, all approaches had to be consistent, yet adapted for local purposes – so a one-size-fits-all approach definitely wasn’t applicable! To add to the complexity, regulators globally have differing milestones and timelines and as the deadline draws nearer, clarifications and milestone changes come thick and fast.”
How would getting involved with IBOR transition work benefit my career trajectory?
The IBOR regulatory changes affect a wide range of business lines and functions across any financial institution. So, IBOR transition projects present lawyers with an outstanding opportunity to gain a wider breadth of skills, experience and commercial insights, and potentially exposure to new sectors as well.
“My IBOR assignment gave me a heightened awareness of both operational and credit perspectives impacting on regulatory changes, and the need to implement systems and policies to deal with regulatory projects involving a high volume of transactions – really useful knowledge, which will serve me well in future assignments,” says Peerpoint legal consultant Mark Manisty.
As well as providing interesting work with top-calibre firms, assisting with IBOR transitions is a strategic way to help lawyers build a professional network and personal brand. That’s particularly relevant for anyone looking to position themselves to thrive and succeed in a post-pandemic marketplace.
There is also the added credibility of being part of such a high-profile and large-scale review and remediation programme – not to mention the sheer buzz and excitement of hitting the ground running and helping firms get their transition programmes over the line.
“As nothing like LIBOR cessation has been attempted before, it was new to everyone and no particular level of expertise was required when I started in my role. Everyone was learning on the job and it was a case of ‘all hands on deck’ ”, says Peerpoint legal consultant Florence McDonald.
“At the same time, the market is constantly reacting and evolving, so it quickly became apparent that flexibility, thinking creatively and being proactive were all valuable skills.”
What kind of legal work is likely to be involved?
A large variety of roles are on offer. For example, there are opportunities for contract lawyers to take the lead in managing projects, overseeing budgets and timelines, collaborating across functions, and helping to guide an already-established transition approach to success.
At the same time, organisations need lawyers who can provide specialist product advice in areas such as regulatory, loans, derivatives, structured finance, and bonds.
For example, Manisty took an IBOR transition assignment with a large US bank, where among other things he advised on the evolution of the bank’s internal risk-free rate policies in response to market responses, updating these according to regulatory and working group recommendations.
“It was really interesting work, especially as it required me to give strategic advice in response to a rapidly changing regulatory and market scenario.”
Lawyers can also be assigned support roles on legal work such as due diligence on contract exposures and document review, clause detection and data extraction, and updating policies and standards. Other areas include litigation arising from contract disputes and reviewing tax arrangements.
McDonald joined the LIBOR transition team at the London branch of a leading US bank. “Among other things, we worked with external counsel to prepare a set of LIBOR transition manuals for each line of business within the bank, setting out contract transition strategies and legal guidance on those plans,” she says.
“We also coordinated with colleagues in the US, London, Toronto, and Hong Kong to advise stakeholders on interpretation and compliance with jurisdiction-specific transition issues, advised on legal risks, and prepared communications relating to LIBOR transition.”
Olivia Kendall-Martin of A&O Consulting is currently advising on IBOR matters for a global bank and commented, “legal teams, alongside the business, are absolutely crucial to the success of any financial institution’s IBOR transition programme, particularly as we start to near regulatory cessation dates for some currencies, and as legislative and regulatory solutions emerge to tackle ‘tough legacy’ populations.”
“IBOR transition is a huge, high profile and cross-cutting regulatory change programme that is very rewarding to be a part of.”
Her own experience echoes that of Peerpoint consultants, “It has been fantastic, both from a personal and professional point of view. The pace of the programme, and the need to work collaboratively across different regions and functions has both increased my product knowledge, and provided an insight into the inner workings of the business in a way that I could never have achieved so quickly before.”
If I took on an IBOR transition project, what kind of support could I expect from Peerpoint?
We work closely with our lawyers to understand their skill sets, needs, and aspirations, and then carefully and creatively match them with the right opportunities and support them in a variety of ways when they are on placement.
For instance, we are the only legal consulting platform with a dedicated consultant management team comprised of lawyers to support and develop our consultants. And that team is on hand to assist at any time.
Throughout the period of their assignment, our lawyers also have access to a range of A&O resources, including an A&O partner contact, A&O professional support lawyers, and knowledge resources. And they can rely on support from our Advanced Delivery and Solutions business, which includes a Markets Innovation Group that has built the IBORMatrix, an AI-powered tool to help firms handle the transition at scale.
Where can I go to find out more?
Learn more about becoming a Peerpoint legal consultant here. Or to speak directly to one of our team, get in touch with: Nikki Pantges in Australia; Georgeanna Mok in Asia; Lucy Hamblin in the UK, Azara Digan in the UAE; and Amie Davidson in the U.S.