Is LIBOR Fading Away and SOFR Emerging to Lead the Way? — Read here!

  • Financial contracts worth several trillions of dollars are based on LIBOR and need to be transitioned to a new rate
  • The number of transactions and specific complex transactions including counterparty and syndicated transactions is large
  • Existing contracts and clauses were framed to cover a temporary unavailability of LIBOR, but not a cessation or replacement
  • Some lending institutions estimate the transition to cost USD200m
  • Ensure new contracts contain “fallback” clauses and sections that clearly set out what happens when LIBOR is suspended
  • Educate internal/external stakeholders as well as their customers to ensure all relevant business implications are dealt with appropriately
  • Test their internal tools/templates/applications with replacement rates to ensure an effective monitoring mechanism
  • Address the material differences between LIBOR and the proposed alternative rate
  • Develop non-LIBOR products
  • Extracting key contract clauses/conditions along with the associated terms and provisions
  • Bucketing the various types of clauses into key categories
  • Framing the relevant SOFR provisions to replace the existing key clauses/categories
  • Detailed impact analysis for further action/recommendation

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Acuity Knowledge Partners

Acuity Knowledge Partners

We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/