Engagement Summary
IBOR transition – it’s been an exciting 18 months – but we are not done yet. One aspect of this transition that has been largely absent from the discussion is the need to ensure that teams executing this once-in-a-lifetime change have the technology and tools that they need to successfully transition to the alternative rates. The wholesale banking technology organization of a top 10 global commercial bank engaged Monticello Consulting Group in late 2019 to spearhead the design and development of digital tools to support the IBOR transition. Monticello kicked off the engagement with a current state assessment of functional processes (credit, technology, operations, and fulfillment) that were in place. Next, Monticello redesigned the functional processes to ensure they were comprehensive and scalable. To support this process redesign, Monticello created a new digital tool to enable systemic intervention in the repricing process to greatly accelerate the LIBOR migration. The tool captured all of the necessary data elements, created a workflow process engine to identify and track the required steps on the process, interfaced with downstream systems to change any needed data elements, and reduced the manual time required to implement change. Ultimately, the Monticello team ensured that the client: (1) effectively engaged and communicated with internal and external stakeholders regarding the transition requirement and timeline, (2) maintained legal integrity of each credit agreement, and (3) demonstrated the effectiveness of each step taken to clients and regulators.
During the process review and discovery, Monticello identified opportunities where the tool and process redesign could support initiatives beyond the IBOR transition. The client had a broad need for a portfolio tool that could be used for all portfolio review activities. As such, the tool was designed to be modular and easily changeable to allow for future workflow processes to be included while being interconnected with the entire system stream. Taking a holistic approach to a singular problem, allowed Monticello to identify a broad-based solution that met the needs of IBOR transition and beyond.
Case Study Detail
PROJECT BACKGROUND
The cessation of IBOR rates has a broad impact on financial services. From technology, sales, internal funding operations, and beyond, this change impacts almost every functional area of a bank. The IBOR cessation is a critical global transformation that requires a bank to demonstrate robust operational readiness. To accomplish this, areas such as process redesign and data consolidation through to regulatory reporting needed to be reviewed and adjusted in order to facilitate a comprehensive end-to-end transition from IBORs to replacement rates. Monticello, in coordination with its client, was tasked to drive success across two significant workstreams. The first mandate was to capture all required data points in relation to wholesale credit exposures from the downstream accounting systems. The second mandate was to create a workflow tool designed to identify priorities and actions to be taken as well as track results while integrating with other applications and systems. Together, these mandates were necessary to streamline the process and accelerate the path to support a successful transition from IBORs to replacement rates. entities based on their overall risk and impact.
ENGAGEMENT OBJECTIVES
Data consolidation and workflow tool creation included four components:
Identify all data points required to (a) locate all credit facilities that have the ability to use an IBOR rate (b) contact internal partners that work with the client to migrate away from IBOR and (c) enable a rate change process that is stable and scalable.
Redesign the end-to-end credit process to facilitate a mix of manual and automatic rate change activities in coordination with technology and operations. Ensure that the redesigned process is robust enough to handle the large-scale volume, approvals, and documentation. Create solutions for any gaps in the new process utilizing internal tools and activities to reduce time to market and increase adoption by end-user groups.
Build a tool that can aggregate the required data and present it to users in a graphical interface that is complete and user-friendly. As part of the tool development process, the Monticello team ensured that the tool was able to interface with upstream and downstream systems to reduce the manual time required to reprice the credit facilities. Additionally, the tool needed to leverage the redesigned end-to-end credit process.
Ensure end-user and technology testing completeness, accuracy, and stability.
BUSINESS VALUE
Monticello Consulting Group, through a continuous partnership with our client, embarked on an ambitious process redesign and digital transformation engagement to accelerate the transition from IBOR to reference rates. By leveraging our data analysis and automation expertise, the Monticello team was able to develop a tool that supported data collection and workflow management of all transition activities. Ultimately, the tool enabled our client to complete large-scale changes to portfolios with minimal manual interventions. Our rigorous program management and testing governance methodologies, end-to-end process understanding, and timely execution helped support readiness for this monumental shift in interest rate benchmark reform.
