Overview
LIBOR or London Interbank Offered Rate is the average interest rate at which major AAA-rated global banks borrow from each other. The ARRC (Alternate Reference Rate Committee) was formed to replace LIBOR and all banks must transition from LIBOR to the new ARR by the end of 2021.
HCLTech offers a gamut of solutions to banks and product partners to help them assess the impact of LIBOR transitions, prepare a comprehensive transition strategy and accelerate the transition at ease.
Key impact of LIBOR transition
- Renegotiating large volume of existing LIBOR-referenced contracts to new rates involves risk and operational difficulty
- Restructuring existing banking systems to adapt to a new ARR poses functional challenges
- Post transition, relook and agree fallback language will involve significant negotiations due to rate changes.
- Loans, derivatives, bonds, securitized instruments and pension products etc., need remediation as an impact of LIBOR transition
Hcl libor transition solutions
Solution Components
HCLTech suite of solutions facilitates banks to comply with the LIBOR transition by leveraging advanced technologies like machine learning (ML) and natural language processing (NLP), optical character recognition (OCR) and Robotic Process Automation (RPA)
System Impact Analyzer
Remediate LIBOR references with ARR
Profitability Analyzer
Identify impact of ARR migration and suggest changes to credit spread
Document remediation using Exacto
Enable transition LIBOR contracts to ARR contracts enabling digital customer journey
Automation testing using HCLTech PEAK
Ready to deploy test scenarios/test cases to perform end to end regression testing
Hcl libor transition solution differentiators
Variety of solution suites
Variety of solution suites
Ability to utilize individual solutions for LIBOR transition based on client’s lifecycle stage
Robust automation testing using HCLTech PEAK
Robust automation testing using HCLTech PEAK
Provides Bulk scenario execution and tracking of execution via screencapture capability
Ready to use test scenarios/test cases
Ready to use test scenarios/test cases
To perform end-to-end regression and integration testing
AI powered Analytical suite
AI powered Analytical suite
Flexible profitability and index comparison
API-based Lean framework
API-based Lean framework
Quicker integration with the existing application landscape
Hcl libor transition solution building blocks
Success stories
Loan IQ Upgrade & LIBOR transition for a large Australian Bank
HCLTech is involved in the upgrade support work for the Loan IQ product, which the bank uses for their lending business
- HCLTech technical consultancy to improve the Loan IQ batch processing time.
- 40% reduction in testing cost and manual efforts by using HCLTech PEAK.
Loan IQ Upgrade & LIBOR transition for a large Australian Bank
Client is a large Australian Banking and Financial Services company. The bank uses the Loan IQ product for their Lending business. Due to the mandate that LIBOR rates would cease to exist shortly, the bank is migrating all existing LIBOR loans to the new ARR rates in Loan IQ. Regression testing during the upgrade and migration phase due to the Large volumes and loan size for migration
HCLTech is currently involved in the Upgrade support work for the Loan IQ product for the Bank in the below 3 areas
-
Technical consultancy -
Handling tasks related to Loan IQ Development issues, resolving issues assigned on JIRA board.
-
Loan IQ Batch monitoring -
Delay in the current Loan IQ batch processing time due to new branch roll outs
-
Solutions in progress -
Splitting batch into multiple jobs, increasing batch servers, batch net long running jobs, Control M related batch job improvements
-
Testing -
HCLTech PEAK (HCLTech’s test automation framework) as a solution for the Bank’s Automation testing requirements for regression testing, system integration testing and negative rate test scenarios
- Automation testing will reduce the cost and manual efforts in testing by 40%
- HCLTech technical consultancy support to improve the Loan IQ batch processing time.
LIBOR to ARR compliance for a leading bank in the U.S.
HCLTech as a strategic partner is involved in
- Impact assessment of the bank's lending applications
- Engagement with document vendor to define document templates
- Automated Loan decision interface for SOFR Products
LIBOR to ARR compliance for a leading bank in the U.S.
- To comply with the LIBOR transition regulation before the mandatory deadline of December 2021
- To be able to identify and analyze the IT impact and provide appropriate remediation for contract management and profitability impact
Handling two rates and indexes at the same time during the period of remediation is very complex. Pricing setup for new products and discovering a solution for the lookback period is complicated
- Impact assessment of the bank’s lending applications to analyze and document the impact on the existing IT systems
- Create index, product groups and map SOFR pricing groups - 22 core products with 600+ product groups
- Deactivation of LIBOR products
- Engagement with document vendor to define document templates - Updating LIBOR with fall back language, implementation of new SOFR documents
- Setting up of new SOFR Plan codes in Loan Servicing platform.
- Government Sponsored Entities (GSE's) Requirements for the new version of Automated Loan decision interface for SOFR Products and Changes required to the Loan Delivery files to GSE's
- Identify appropriate remediation mechanism for different exposures based on contractual obligations
- Provide sufficient timeline for LIBOR compliance through extensive regression testing
