Join Murray Longton (Capco) and Lia Oyman (Franklin Templeton) as they take a look at Operational Readiness in the IBOR Transition.
The Operational Readiness component of the LIBOR 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 (e.g. transfer pricing or asset valuation) relying on benchmarks such as LIBOR, 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.
We will explore the large-scale operational and IT impacts that firms should be considering to ensure business readiness and that target state technology requirements are met.
The discussion will look to address topics pertinent to:
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