Grant Thornton forms IBOR transition partnership
The UK wing of professional services firm Grant Thornton has forged an innovative and strategic collaboration with legal firm Konexo and DXC Technology to provide an integrated solution to the Interbank Offered Rates transition. The collaboration aims to assist banks and borrowers with the complicated transition to an alternative rates benchmark before 2022.
IBOR systems, most prominently known for LIBOR (London Interbank Offered Rate), have been the globally accepted benchmark of interest rates that indicate borrowing costs between banks for major currencies and tenors. However, the benchmark has increasingly lost validity thanks to a rigging scandal that disrupted the City of London, and because the market effectively shut down through the financial crisis. As a result, IBOR rates are being phased out over the coming two years.
June 2019 saw bus operator National Express become the first company to take out a loan with British bank NatWest based on Sonia, a replacement for ill-reputed interest rate benchmark Libor. It was billed as the first switch of thousands that British firms would make by end-2021, when the benchmark is set to be decommissioned – however by November only one other loan had followed, between NatWest and South West Water. This illustrated the challenges banks and borrowers face as regulators attempt to end the use of Libor, which is embedded in as much as $340 trillion financial contracts worldwide.
In order to help boost the slow progress transitioning from IBOR systems has seen, professional services firm Grant Thornton has forged an alliance with legal and compliance services provider Konexo and DXC Technology to provide an integrated solution. According to a release from Grant Thornton, the collaboration will bring core capabilities to help clients meet the FCA’s 2022 deadline and transition to a replacement rate before the IBOR rate discontinues.
Brett Aubin, Head of Regulatory Response at Konexo, commented, “As Financial Services organisations continue to deal with the consequences of the 2008 crisis, amongst unprecedented levels of commercial, regulatory and customer pressure, it is paramount that we service our clients differently. We recognise that for ‘wide problems’ like the IBOR transition, no single organisation can responsibly deliver an integrated solution out of their core strengths alone.”
John Da Gama-Rose, Head of Capital Markets and Financial Services Business Consulting at Grant Thornton UK, added, “The challenges facing the financial services market in transitioning away from the long-established IBOR benchmark are paramount, and each organisation’s needs and response to this will vary. The forward-looking expertise in strategy, advisory and delivery within our financial services team helps ensure our clients are not only prepared for change, but best placed to capitalise and compete.”
