3 December 2020

The London Inter-Bank Offered Rate (LIBOR) has been used by major global banks as a key benchmark interest rate that indicates borrowing costs.  

Research estimates that there are over 100 million contracts globally which use LIBOR as the reference rate, with a value totalling more than USD 400 Trillion. 

Under new regulation, which comes into effect on 31 December 2021, LIBOR will be officially retired and no longer used to determine interest rates for loans such as residential and commercial mortgages. 

With the upcoming discontinuation, this creates a new requirement to clearly identify and locate all LIBOR-related contracts and agreements to guarantee regulatory compliance.  

But a huge issue concerns how FSOs manage and organise their data estate: 

  • Traditionally, the way in which FSOs are structured (with varying documentation and contract retention storage within differing departments) means they do not hold a central repository for LIBOR-related data. 
  • As such, FSOs will only be able to adequately identify all data referencing LIBOR by trawling through their vast silos of data before the prescribed end date.  
  • This issue is compounded further as FSOs hold substantial volumes of unstructured dataThis includes Word Documents, PDF Files and spreadsheets- hugely common when it comes to contracts and agreements 
  • Therefore, finding LIBOR-related data is, undoubtedly, going to be a costly and time-consuming exercise.  

Failure to source all contracts impacted by the termination of LIBOR will inevitably lead to regulatory breaches for FSOs.  

This will result in significant financial fines, particularly if an FSO’s products are regulated by the Securities Exchange Commission (SEC), and an FSO’s reputation will ultimately be compromised by such breaches. 

As such, more and more financial organisations are turning to technology to help them find references to LIBOR quickly and easily across entire databases.  

With Automated Intelligence, our platform acts as a centralised data estate, meaning financial organisations have the capability to trace all LIBOR-related data within several hours – and can see all LIBOR contracts and agreements in one place. 

If your organisation’s data compliance is affected by the retirement of LIBOR, and you are interested in speaking to one of our data management specialists, get in touch today.