Over half of financial institutions delayed Libor transition due to Covid-19

Jon Hart, president of RWS’s regulated industries division.

Although the 31 December 2021 Libor transition deadline is fast approaching, over half of sellside firms have experienced disruption in their preparations due to Covid-19, according to a report from language and content specialist SDL, part of RWS Holdings.

The report polled 60 heads of risk, compliance and audit at large financial institutions across Asia Pacific, Europe Middle East, Africa, and North America.

Of those that said their transition to the risk-free rate regulatory framework had been delayed by the pandemic, 22% put plans behind schedule while 32% need additional assistance to successfully meet the deadline.

It also found that while the majority or 88% needed to update documentation in multiple languages for at least one region globally, 40% only started their proverbial engines within the past year or have not yet started the process.

In addition, 54% said they will need third-party assistance from legal advisors with 22% working with translation specialists to meet the complex regulatory cross border document challenges by year end.

“The global pandemic has made an already mountainous undertaking even more difficult for investment banks, market-makers and asset managers to get their internal processes aligned and ready for this change,” said Jon Hart, president of RWS’s regulated industries division.

He added, “Although much Libor content has been written in English to accommodate financial transactions in London and New York, critical documentation, including contracts and policies, are often global in nature. It will be a huge undertaking to avoid the risk of misinterpretation.”

He noted, “Regulatory language needs to be translated properly at local and international levels by expert linguists in both the language and context of that material, so it’s critical that companies immediately identify and prepare their content for treatment to avoid being squeezed as the deadline approaches.”

Last week, following a consultation by ICE Benchmark Administration (IBA), the administrator of Libor, the Financial Conduct Authority confirmed that publication of Libor would cease at the end of 2021 for sterling, euro, Swiss franc and Japanese yen, and for one-week and two-month US dollar settings.

The UK regulator estimates that the value of outstanding financial contracts that still reference Libor is $260 trillion.

©BestExecution 2021

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