In this post, we’re sharing our top six quotes and takeaways from LIBOR Summit 2020, as well as some links to the newly available on-demand sessions and resources.
Sarah Podella // August 4th, 2020
Last week was the second installment of LIBOR Summit 2020, an exciting virtual event about all things – you guessed it – LIBOR. The event hosted three separate panels of industry experts who came together to present and discuss:
In this post, we’re sharing our top six quotes and takeaways, as well as some links to the newly available on-demand sessions and resources.
One of the re-occurring messages throughout the event was made loud and clear – the LIBOR transition is not slowing down. In his keynote session, Tom Wipf, Chairman of the Alternative Reference Rates Committee (ARRC), specifically called out that waiting for some kind of self-fulfilling resolution is no longer a viable strategy. Wipf went on to say that, “At the height of COVID-19, the FCA and other regulators were very clear that although potential near-term deadlines could be missed due to the work-from-home challenges, the [LIBOR] end date is the end date.” He also presented several ARRC resources for general best practices, recommended fallback language, and date-specific transition milestones. All these resources are available for download on the LIBOR Summit 2020 website here or directly from the ARRC website.
To that same note, Matt Ochs of Morgan Stanley echoed Wipf and reinforced the notion that companies need to formalize their operational readiness plans or face significant financial consequence. Ochs spoke in depth specifically about the impacts of the Central Clearing Counterparty (CCP) discounting risks of the conversion of federal funds to SOFR (Oct. 16 2020) and its major tailwinds for the rest of the market. See the full keynote session (Transition Update: COVID-19 is Not Slowing Down this Train) here.
In the last session of the afternoon, a panel of technologists discussed the importance of aligning on key LIBOR transition milestones in relation to the the entire timeline. Daryl Shetterly of Orrick spoke about false tech assumptions causing companies to unintentionally shorten their LIBOR transition runway, which then creates more opportunity for executional risks. It is imperative that stakeholders and technologists work together from the onset to map out project objectives, strategies, and expectations. See the full session (Technology Solutions: Practice Applications and Limitations) here.
Charlie Connor of Heretik and Tim Cerino of KPMG had an interesting conversation about their experience with financial institutions’ decision making in regard to their LIBOR response, as well as the different mindset they may have while choosing their transition strategy. Some banks are solely focused on solving the LIBOR issue and are happy to outsource that service. Others are using this as a pivotal moment to invest in technology, build out data teams, and begin structuring their data to solve more (and future) business challenges in house. See the full session (Technology Solutions: Practice Applications and Limitations) here.
When asked how technology helps figure out what’s in contracts, Tim Cerino of KPMG emphasized the importance of first just knowing what to look for. Dumping documents into any piece of software will never yield desirable results. Instead, Cerino says to get started the technologists need the business context to then boil it down into a decision framework. After giving the above Siri and Alexa example (and setting off all the panelists smart devices), Cerino went on to explain how some contracts are generic, like security agreements. However many more are distinct, such as commercial loans. Although teams may understand the purpose and the language of a commercial loan, the dialect in private side documents is significantly different across banks. “We don’t have generic AI tools. If we have a system that works at 98% accuracy at Bank A, we may see something like a 50% accuracy at Bank B,” said Cerino. “We need that incremental context to get these LIBOR solutions to work at an acceptable level.” See the full session (Technology Solutions: Practice Applications and Limitations) here.
In continuation of the conversation about contract nuances, Chris O’Connor of Complete Discovery Source raised the additional point that there are also significant differences in contracts within an institution. Taking the time to build bespoke, relevant, company-specific models is well worth the investment. O’Connor further explains that there’s a stigma that it is ‘risky’, but in reality that’s how they are helping companies find short and long-term success. See the full session (Technology Solutions: Practice Applications and Limitations) here.
All of the sessions from first and second installments, as well as additional materials are available for free on the LIBOR Summit 2020 website. Check it out below!
Sarah is the Director of Marketing at Heretik. Prior to Heretik, she worked as the Product Marketing Manager for Shiftgig. Sarah began her career in advertising, working for brands like Nike, Verizon, Fireball, Coca Cola, the NFL, and more.