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.

HCL 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

HCL 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 HCL PEAK

Ready to deploy test scenarios/test cases to perform end to end regression testing

HCL LIBOR TRANSITION SOLUTION DIFFERENTIATORS

Key benefits

Variety of solution suites

Ability to utilize individual solutions for LIBOR transition based on client’s lifecycle stage

System impact analyzer

Robust automation testing using HCL PEAK

Provides Bulk scenario execution and tracking of execution via screencapture capability

Robust automation testing using HCL PEAK

Ready to use test scenarios/test cases

To perform end-to-end regression and integration testing

Profitability impact analyzer

AI powered Analytical suite

Flexible profitability and index comparison

AI powered Analytical suite

API-based Lean framework

Quicker integration with the existing application landscape

API-based Lean framework

HCL LIBOR TRANSITION SOLUTION BUILDING BLOCKS

 
Profitability analysis tool
Simulation graphs (LIBOR vs ARR)
Consolidated ARR database
Code Analyzer
RPA toolkit
Compounding calculations per RFR standards
All major ARRs/RFRs
APIs built to fetch and update rates
Like-to-like compounding tenors
Updated contracts and addendum handling
Amend and finalize contracts via Exacto
Legacy agreements management
Tax and accounting considerations to handle valuation changes
Interim fallback provisions against the new fallback
Other product simulations
End-to-end automation and regression testing
Look back rates data
Compounding index comparisons
Spread adjustments against LIBOR
Agreement management and new fallback language

SUCCESS STORIES

HCL is involved in the upgrade support work for the Loan IQ product, which the bank uses for their lending business

  • HCL's technical consultancy to improve the Loan IQ batch processing time.
  • 40% reduction in testing cost and manual efforts by using HCL PEAK.
Technical consultancy, Loan IQ Batch monitoring, Automation testing

HCL 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
Impact assessment, deactivation of LIBOR products, setting up of new SOFR plans, contract management analysis