Financial Services Ireland


IBOR transition readiness: where banks are and next steps

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We are delighted to share findings from the third edition of our IBOR Transition Readiness Banking Survey which provides a benchmark on industry progress and summarises what moves are yet to be taken on the path to IBOR transition.

Having interviewed 28 banks between November 2020 – January 2021, our latest survey finds that despite having made progress in transitioning contracts from IBORS, both Global Systemically Important Banks (G-SIBs) and local banks must accelerate progress with the bulk of the transition yet to take place. In brief:

  • 82% of banks we spoke to expect to meet the transition milestone of end-2021 for the front book, with half expecting legacy transition to take longer.
  • 35% of banks expect that the majority of their US Dollar IBOR products will not be replaced by 2021 year-end.
  • For 2021, most global banks’ IBOR budget will be greater than $100m, but that figure falls significantly for 2022; with technology being the costliest area.

The survey investigates seven key areas of readiness with respondents:

  1. Program Readiness – Responses show that challenges remain despite banks’ progress on IBOR – with technology and repapering staying in focus alongside themes such as ‘Tough Legacy’, where respondents continue to have more questions than answers.
  2. Technology – While taking a closer look at transition technology implementation risks, the survey findings show that the scale of technology execution and the related implementation  testing will require strategic focus from banks in 2021.
  3. RFR Product Adoption – Answers in this area indicate that Sterling transition has experienced greater momentum than USD – and the Ice Benchmark Administration’s limited extension eases pressure.
  4. Conduct Risk – Some of the challenges facing banks in their implementation of mitigation strategies to manage conduct risk include mapping conduct risks to specific client journeys, alongside tailored training and client communication plans.
  5. Client Outreach –The majority of banks are looking to proactively transition clients away from IBORs in 2021, with many already having made a start in Q4 2020. 54% of banks, in the context of loans, have a design principle to contact the customers once, and the respondents that are using a dual approach will do so mostly for syndicated and bilateral loans.
  6. Contract Repapering – Respondents called out issues including key risks surrounding the availability of legal resources, and immense pressures on in-house legal teams.
  7. Structured Notes – Banks have progressed risk assessments across their portfolio of structured notes; but few are complete.

Download our findings below, and reach out if you have a question.

Thought Leaders

Danny Buckley

Banking & Capital Markets, Sector Leader

Ken Phillips

FS Partner, Financial Accounting Advisory Services