Temenos smooths banks transition from London Interbank Offer Rate (LIBOR) to Risk-Free Rates (RFRs)
- 09.04.2020 12:58 pm
Temenos (SIX: TEMN), the banking software company, announced the availability of its updated banking software products to ease banks’ transition from the London Interbank Offered Rate (LIBOR) to alternative Risk-Free Rates (RFRs), which is mandated by year-end 2021. Temenos software covers the full range of banking products that can be linked to the global benchmark including corporate loans, floating-rate notes, and interest-rate swaps. Temenos’ modern digital banking platform offers the functionality required to ensure clients meet the global regulatory demands for the LIBOR phase-out and replacement at the end of 2021. Developed in close collaboration with its customers, Temenos Transact, Temenos Infinity and Temenos Fund Administration updated software products include features that enable banks to smoothly transition to RFRs.
The FCA, Bank of England and members of the Working Group on Sterling Risk-Free Reference Rates have confirmed that the target date for the retirement of LIBOR stands despite the impact of COVID-19 on financial firms. The transition from LIBOR remains an essential task that will strengthen the global financial system.
Many financial institutions worldwide set their own rates relative to LIBOR. At least $350 trillion in derivatives and other financial products are tied to the global benchmark. The LIBOR replacement will impact the systems that underpin financial products based on the benchmark, such as loans, mortgages, bonds, and derivatives. This poses a significant systems challenge in transitioning to new alternative benchmarks in the form of RFRs, along with the need to offer alternative products, migrating existing contracts and supporting additional legal and contractual complexities.
In response to this need, Temenos is also offering a migration dashboard to help financial institutions as they embark on their transition in order to update millions of adjustable-rate contracts in a seamless and cost-effective manner while staying compliant with their regulators.
Adam Gable, Product Director – Financial Crime, Treasury and Risk, Temenos said: “Temenos is working closely with its clients to ensure they achieve a timely transition to alternative reference rates through planning, testing and implementation, to ensure the migration has minimal impact on operations and interest rate exposure. Moving away from LIBOR to alternative rates is a complex task but it presents an opportunity for banks to modernize their IT infrastructure with functionally rich banking software and ensure that they add value and continue to give outstanding services to their customers. Leveraging Temenos Continuous Deployment, banks can future-proof their business without resorting to manual interventions or additional software solutions that require integration with their existing banking platform. Temenos is pleased to be able to help banks avoid financial and operational disruption while staying competitive and compliant.”
Daniel Mayo, Chief Analyst, Financial Services Technology, Omdia, said: “Transitioning from LIBOR will change the financial institutions market risk profiles, requiring changes to risk models, banking product design and hedging strategies. Given the volume of banking products and processes that will have to change, we recommend that banks accelerate their plans to modernize the systems underpinning their banking products in order to meet the regulatory deadlines. Banking software vendors, like Temenos, offer banks the capabilities required to ease this transition.”
Temenos’ digital banking platform delivers rich and broad banking functionality with can be configured quickly to meet changing business and regulatory requirements. Temenos banking software is built on cloud-native, cloud-agnostic technology that enables banks to significantly reduce their total cost of ownership through elastic cloud scalability, distributed database technology and multi-cloud resilience, all underpinned by the benefits of vendor and platform independence. Temenos’ microservices-based architecture allows for progressive implementations which provide tangible business benefits at every step. Extensive AI capabilities are embedded across the platform supporting both personalization and operation efficiencies. Temenos gives banks freedom of choice to deploy software on premise, in any public cloud, or as a Temenos SaaS.