Project Management

LIBOR Transition Learning Goals – Topics in Focus

Learning Objectives

  1. Understanding of Unique Challenges of Managing LIBOR Transition Projects.
  2. LIBOR Transition Fit into the Organizational and Management Structures of Financial Services organizations.
  3. Operating models for LIBOR project management.
  4. Establishing LIBOR Project Management Framework.
  5. Resource and Budget Planning.
  6. Adapting ARRC’s Practical Implementation Checklist for SOFR Adoption.
  7. Interactions with business, functional and support departments.
  8. Best Practices for Management of LIBOR Transition Project Timelines.
  9. Management of Internal and External Communication.
  10. 10 common misconceptions.

Course Framework

1. Overview of LIBOR and How We Got Here

  • Genesis of LIBOR, its composition and mechanics
  • IBOR as a global benchmark and foundational challenges
  • 2008 Global Financial Crisis and necessity of LIBOR replacement
  • Overview of the LIBOR BOOTCAMP program

2. Overview of Project Management Challenges

  • LIBOR Transition Program Framework​
  • Operational and Technology Readiness​
  • Communication Strategy​
  • LIBOR Transition Program Mobilization

3. LIBOR Transition Timelines and Challenges

  • Overview of new RFR benchmarks
  • Chronology of regulatory statements, actions and deadlines
  • Transition timelines
  • Regulatory bodies and committees
  • Scope and challenges of LIBOR transition

4. Establishing LIBOR Project Management Framework

  • Operating models for LIBOR project management
  • Assignment of responsibilities
  • Estabilshing and communicating transition scenarios
  • Ensuring project delivery and completion

5. Organizational and management structure

  • LIBOR Transition organization
  • Project Management and Task Alignment
  • LIBOR transition timelines
  • Main Concerns across different Asset Classes

6. LIBOR Transition Management - Structure

  • Organizational and management structures of financial services organizations
  • Typical regulatory framework
  • Complexity of LIBOR transition
  • A reflection from a great global challenge of the century
  • Systemic components of LIBOR transition
  • Institution-specific components of LIBOR transition
  • Operating models for LIBOR project management

7. LIBOR Transition Management - Execution

  • LIBOR Transition Program Framework
  • Operational and Technology Readiness
  • Communication Strategy
  • Exposure Quantification and Management
  • Portfolio and Product Strategy
  • Contractual Remediation

8. Risk Management

  • LIBOR transition impact on system and institutional risk
  • How to identify, measure, monitor and control LIBOR transition risks
  • Principal risk factors such as rates and credit (xVA)
  • Client management and communication
  • Impact on Risk control and Finance

9. Regulatory and Legislative Initiatives

  • Details of the involvement of specific regulatory bodies
  • List and summaries of proposals in 2020 and upcoming 2021
  • RFR Working Group Touch Legacy Task Force overview
  • OCIE Risk Alert examination on LIBOR transition
  • Impact on consumer finance related legislation and regulation

10. ARRC Practical Implementation Checklist for SOFR Adoption

  • Transition program mobilization and management
  • Operational and Technology Readiness​
  • Communication Strategy​
  • Exposure management and valuation

11. ARRC Practical Implementation Checklist for SOFR Adoption - II

  • Portfolio and Product Strategy​
  • Contractual Remediation​
  • Risk Management​
  • Accounting and reporting
  • Taxation and regulation

12. Market calendars and business day conventions

  • Business and Calendar Days
  • Holiday Calendar and Combinations
  • Roll Conventions such as Modified Following or Preceding
  • Resets, Interest Rate Periods and Payments
  • Examples with MM, Swaps, Interest Rate swaps and Non Deliverable Forwards

13. Cash Instruments

  • Scope and size of cash instruments and markets
  • Challenges specific to cash markets
  • Definitional Overview
  • Consent Solicitation
  • ARRC Recommended Fallback Language for all types of instruments
    • Floating Rate Notes
    • Bilateral Business Loans
    • Syndicated Loans
    • Securitization
    • Adjustable-rate Mortgages (ARMs)

14. Fallback Language and Waterfall

  • ARRC Recommended Fallback Language for Securitization
  • ARRC Recommendations on Fallbacks for Adjustable-rate Mortgages (ARMs)
  • ARRC Recommended Fallback Trigger Language for new issue FRNs
  • European Central Bank (ECB) Guidance on Fallbacks for Euro Rates

15. Derivatives - New Payment and Accrual Conventions

  • Differences among 1M SOFR, 3M SOFR, Eurodollar and Fed Fund future
  • Reasons for calculation differences
  • Differences of payment and accrual conventions among fixed income, lending and derivatives
  • Listing of reliable rate calculation engines for reconciliation of payments
  • Disappearance of the ability to reconcile first floating leg cash flow at trade inception
  • Lack of floating rate leg fixings on trade date and resulting reconciliation issues
  • Detailed examples of payment gap, lockout, observation shift and observation period shift
  • Reset in Advance SOFR option products

16. Mechanisms of the Transition Fallback and its ISDA Adjustment

  • Relationship among pre-cessation, announcement, and trigger dates
  • Detailed fallback calculation algorithm
  • Routes for banks to transform current LIBOR portfolios

17. P&L Impact on Fallback Date and Its Implications

  • Significance of value transfer for existing Libor contracts
  • Impact on counterparty exposure, collateral and xVA measures
  • Impact of tax treatment on the decision- making process for transition timing
  • Limits and risk mitigation on potential fallback P&L impact
  • Exposure measures and hedging of LIBOR SOFR basis spread

18. Accounting Implications of Transition of Bonds and Swaps

  • Premium/discount amortization due to Fallback
  • Realized P&L on swaps and fixed income before the fallback
  • Changes in Hedge relationships when deals are renegotiated
  • Pitfalls with SOFR being a new benchmark rate for Hedge effectiveness
  • Tax implications due to significant modifications
  • Large MTM loan impact due to LIBOR to SOFR discounting

Program Expert Faculty

Sanjay Sharma - LIBOR Bootcamp

Sanjay Sharma, PhD

Chairman GreenPoint Financial
Former CRO, RBC Global Arbitrage and Trading and Natixis, North America

During 2007-16 Sanjay was the Chief Risk Officer of Global Arbitrage and Trading Group and Managing Director in Fixed Income and Currencies Risk Management at RBC Capital Markets in New York. His career in the financial services industry spans over two decades during which he has held investment banking and risk management positions at Goldman Sachs, Merrill Lynch, Citigroup, Moody’s and Natixis. more…
Tim Glauner - LIBOR Bootcamp

Tim Glauner

Head of Capital Markets Global Solution Consulting for Americas, Finastra

Tim leads the Americas’ Capital Markets practice, Global Solution Consulting at Finastra, specializing in front-office, risk and quantitative areas in capital markets for broad asset class coverage including interest rate/inflation/FX/hybrid derivatives, fixed income including corporate and ABS/MBS securities. more…