The financial services industry is in the midst of a significant transformation, as borrowers and lenders work towards a new rate-setting standard. LIBOR has been a foundational element of lending and borrowing for decades, but it will be retired in 2021.
The changes in data capture, norms and reporting practices required for LIBOR cessation are well known. Yet the relationship between contracting—an essential element of any transaction—and LIBOR has too often been overlooked.
In fact, one large U.S. financial institution was still executing agreements referencing LIBOR as late as June 2019, despite a firm-wide effort to sunset LIBOR language.
A large pool of finance contracts have language referencing LIBOR, often as a preferred rate-setting mechanism. According to Michael Held, general counsel of the New York Federal Reserve, “the gross notional value of all financial products tied to U.S. dollar LIBOR is around $200 trillion—about 10 times U.S. GDP.” Nearly every financial transfer agreement is affected by LIBOR cessation.
To transition successfully, institutions need to update thousands of agreements to comply with post- LIBOR rules and standards.
Enterprise contract management software provides the tools and capabilities necessary to tackle this monumental task. In this eBook, we’ll explain how AI-infused contract management software can identify non-compliant language at scale to accelerate LIBOR cessation efforts while reducing risk and improving outcomes.