The  results of a new survey on the implication of recent market volatility and the pandemic on the LIBOR transition showed that participants were progressing on “operation[s], risk, infrastructure, systems re-tooling, interactions with critical third parties, [and] meeting governance guidelines.”

The report, by Sia Partners, followed-up on a  previous study* which identified significant operational, legal, organizational and risk challenges, particularly for small firms, in the transition from LIBOR. In the new study, conducted between April and June of 2020, Sia Partners found that participants:

  • are using the work-from-home period as an opportunity to address the “enormous magnitude” of continuing the transitions at every level of their respective institutions;
  • did not reduce LIBOR budgets or attention to governance as a result of market fluctuations;
  • from smaller institutions noted a “lengthier impact” concerning (i) transition workstreams and (ii) the reallocation of resources;
  • reported progress on transition efforts as to (i) issues involving “operation[s], risk, infrastructure, systems re-tooling, interactions with critical third parties, [and] meeting governance guidelines,” (ii) initiatives by working groups based in both the United States and the United Kingdom, and (iii) more recently established initiatives by operations and vendors working groups;
  • agreed with policymakers that the transition should continue on schedule, since adjusting the deadlines could harm firms that have already made investments in meeting the deadlines (e.g., costs in time and resources and capital expended); and
  • emphasized client/counterparty related-issues as the greatest obstacles in meeting the transition deadlines, such as (i) communication with clients, (ii) contract remediation efforts and (ii) ensuring that progress is being made by counterparties.

*Note: Cadwalader co-published this benchmarking study.

Commentary Lary Stromfeld

This update to the initial comprehensive study allows market participants to mark themselves against the progress of peers as well as the expectations of regulators. If there is one clear conclusion it is this: preparation for LIBOR transition must continue unabated.