Grygo is the chief content officer for FTF & FTF News.
The language, documentation, and content management issues involved in the financial services industry’s transition away from the London Inter-bank Offered Rate (LIBOR) has not gotten much attention.
But it is problem for many firms under the gun to end their usage of LIBOR by the end of this year.
So says a research report “Preparing Content for the LIBOR Transition,” from SDL, a vendor that provides translation and content management solutions for many industry verticals, including financial services firms such as asset managers and investment banks. SDL is based in Maidenhead, in the U.K., and is part of RWS Holdings plc.
The research results are based upon data from “tier one financial organizations across APAC, EMEA, and North America,” according to SDL.
The researchers interviewed the heads of risk, compliance, audit, and communications at sell-side firms about their plans to manage content and paperwork updates. “Organizations surveyed provide a range of debt and equity products, including pensions and insurance, loans, credit, fixed interest and derivatives,” according to SDL.
Most financial services firms in the securities industry are moving away from the scandal-ridden LIBOR and transitioning to the relatively new Secured Overnight Finance Rate (SOFR).
The big takeaway is that despite the fact that 88 percent of respondents “need to update documentation in multiple languages for at least one region globally, 40 percent only started planning for the transition within the past year or have not yet started the process.”
Other big takeaways from the research are:
- 54 percent report that they “have experienced disruption to their LIBOR transition due to the impact of Covid-19, placing them behind schedule or requiring assistance to meet the deadline;”
- A huge percentage or 82 percent of respondents “use additional Inter-Bank Offered Rates (IBORs) in other international markets, particularly in the Americas and EMEA, which will increase the workload and extend the complexity of the transition for years to come;”
- More than half, or 54 percent report “they will need third-party assistance from legal advisors with 22 percent working with translation specialists to make the deadline and meet the complex regulatory cross border document challenges.”
The COVID-19 global pandemic “has made an already mountainous undertaking even more difficult for investment banks, market-makers and asset managers to get their internal processes aligned and ready for this change,” says Jon Hart, president of RWS’s Regulated Industries division, in a prepared statement.
SDL officials add that the major content challenges for the LIBOR move will be in two areas:
- “Accumulated content built up over 40 or so years of LIBOR operation. Organizations will need to identify areas of documentation that are still relevant and the technical changes that require updates, often in multiple languages;”
- And, “New content that needs to be created to support the transition — the majority of respondents said that their external communications (from customer contracts to external policies) will need to be included in their organizations’ initiatives to update their materials.”
“Although much LIBOR content has been written in English to accommodate financial transactions in London and New York, critical documentation, including contracts and policies, are often global in nature,” Hart adds.
“It will be a huge undertaking to avoid the risk of misinterpretation. Regulatory language needs to be translated properly at local and international levels by expert linguists in both the language and context of that material, so it’s critical that companies immediately identify and prepare their content for treatment to avoid being squeezed as the deadline approaches,” Hart says.
That deadline is not likely to be moved, according to a recent SecOps/FTF Online panel discussion, “Ops & the LIBOR Transition.” (This must-see panel is slated to be available on demand soon: https://bit.ly/3tVUG37 .)
The panel moderator Jaime Madell, a partner at Kirkland & Ellis LLP, and panelists Jeff Himstreet, vice president and corporate counsel at PGIM, Inc., and Misharr Rutnagar, vice president in corporate treasury at Goldman Sachs, all agreed that it would take a major event for the LIBOR-to-SOFR transition to get an extension.
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