Sionic's Xavier Pujos on preparing for life after LIBOR

27 March 2020 4 min. read
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As organisations inside and outside the banking sector prepare for the landmark transition away from LIBOR and similar interbank offered rates, many may struggle to keep up with the huge workload and costs before 2021. According to Sionic Managing Partner Xavier Pujos, consultants will play an important role in helping to fill this gap.

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, LIBOR rates are being phased out over the next two years. According to Xavier Pujos, Managing Partner at Sionic, however, many organisations will struggle to meet that deadline.

Speaking in a video interview for Sionic, Pujos explained, “All participants in the market, not just banks, will have to adapt to the fact LIBOR is going to disappear in the short-term horizon. The UK has imposed the end of 2021 for that, and banks, asset managers, custodians and everyone else need to align themselves with that timeline. However, clients do not have the number of people or resources required to handle the number of projects needed, which is huge.”

Pujos, who is an expert in banking risk and regulation, went on to warn that some studies suggest LIBOR transition projects will amount to a bill of $100 million for each big bank. It will also lead to a huge amount of work and people needed to execute it – something Pujos recommended organisations should seek assistance for from the consulting sector.

Outlining how Sionic specifically could help with the matter, Pujos expanded, “We can come in. We’ve got the experience, the expertise needed – we know what LIBOR is about. A lot of people in the banks know as well – but they are not available to lead those projects. We can do that for them to succeed in their transition. We’ve got a footprint, versatility, and a cost-advantage to the Big Four, so we can really compete."

Forged from a cross-Atlantic deal in 2019 between Catalyst Development and Sionic Advisors, the global consulting firm now known simply as Sionic is based in more than a dozen locations worldwide, including North America, Europe and Asia, while continuing to expand at pace. Its more than 300 staff cater to clients from the financial services sector of three continents, specialising in a unique blend of business change and people performance work for financial services entities.

Further highlighting Sionic’s unique offering to clients regarding LIBOR transition, Pujos said, “We hire people who are experienced, who have worked in asset management firms, as wealth managers, in banks, and who know inside and out what our clients are doing. They are not professional consultants, for the most part, until they join Sionic. [After joining] they acquire new skills, but they have all that background and expertise to put to the service of our client. To a large extent, the Big Four do not have that – so that makes us a different proposal, and a very efficient machine to progress with our clients.”

In addition to that, Pujos also told that in light of recent events, working from home (WFH) has made processes less efficient and more time consuming for banks. This means that more time and effort must now be dedicated to BAU/RTB (Run The Bank) and less time is available for Change The Bank (CTB) processes such as new projects and transformations – making that another area where Sionic can help.

Pujos added, “Compounded with the strains of working differently and having to adapt to the new conditions quickly (how efficient are controls in that new environment?) is the fact that volumes on markets have increased due to panic and volatility. Banks now have to extend loans to SMEs under the new frameworks such as CBILS, assess new risks, deal with customers strapped for cash, arrange delays for mortgage payments etc... so the RTB workload has massively increased, diverting resources away from projects.”