Risk and regulation is at the top of the strategic agenda for financial services companies. In an interconnected and globalised world, organisations operate in a complex web of risks and have an obligation to keep up to date with an evolving regulatory environment. To maintain momentum and competitive advantage, businesses must identify and assess the impacts on processes and controls, data and systems.
A major regulatory shift is the move away from InterBank Offered Rates (IBORs) to new benchmarks. When the London Interbank Overnight Rate (LIBOR) is discontinued, the IBOR transition related loan products are likely to incur economically undesirable outcomes including legal, conduct and operational risk.
The transition process will have organisational and technical impacts for financial services companies, but delaying it is not an option as it can lead to damaging financial, customer and operational outcomes. At Mazars, we offer a variety of end-to-end solutions and bespoke services to help you manage the transition to risk-free-rate benchmarks. Using our proprietary Mazars IBOR Tool, clients can measure and monitor IBOR risk in their portfolio, and develop a structured and optimised transition strategy.
Drawing on our broad industry experience, our solution takes into account risk management and transition structure, valuation and model risk management, legal implication, processes and systems infrastructure, client communication and product governance, as well as financial and regulatory impacts.
Our proprietary Mazars IBOR Tool measures and monitors IBOR risk in our clients’ portfolios, assisting them to develop structured and optimised strategy:
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With COVID-19, being declared a pandemic on March 11, 2020, financial institutions have had to shift most of their resources to mitigate the risks that have arisen. This has adversely affected important activities, one of which is market participants’ efforts to detach from LIBOR before its cessation at the end of 2021. As a result, most of the market’s attention continues to focus on two areas...
One of the major challenges of IBOR transition is the availability of historical data on alternative risk-free rates (RFRs) required to implement interest rate model changes or re-calibration. With the Secured Overnight Financing Rate (SOFR) only published since April 2018, the available time series do not provide enough observations for risk modelling. Adding to that, derivatives markets...
The revised market risk framework – also known as the Fundamental Review of the Trading Book (‘FRTB’) – not only impacts an institution’s regulatory capital charge calculation for market risk, but also affects operational, governance and business strategies.
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