For most financial institutions, executing the move away from LIBOR to alternative reference rates (e.g., SOFR) will turn out to be one of the most colossal projects they have ever undertaken. It requires them to focus on high-priority requirements, such as:
- Identifying the contracts that need to be transitioned from LIBOR to alternative reference rates.
- Renegotiating legal fallback terms.
- Operationalizing critical terms in legal agreements.
- Updating software systems.
- Quantifying potential financial impacts.
The “repapering” exercise—capturing contract data and making the necessary amendments to agreements that require renegotiation—will be enormous and substantial financial risks may be faced by institutions if it is not done correctly. A manual approach to executing such as a project may not even be an option given the significant resources, time and expense that would be required.
The repapering exercise, however, can be readily achievable by adopting an automated artificial intelligence (AI) solution designed to perform the review, analysis, updating and extracting of critical information in LIBOR-based contracts.
In this white paper, Numerix Chief Strategy Officer and EVP of Client Services, Satyam Kancharla, and Gary Mandelblatt from NextGen Strategic Advisors, provide an assessment of the key challenges associated with renegotiating the millions of contracts that reference LIBOR, operationalizing the updated renegotiated terms and the legacy contract terms, as well as managing the general risks of the transition. They then highlight how an AI driven capability can be used to undertake this effort efficiently, accurately, and in a timely manner.
AUTHOR BIOGRAPHY
Satyam Kanchalra, Chief Strategy Officer and EVP of Client Services, Numerix
Mr. Kancharla, as Chief Strategy Officer and Executive Vice President, is responsible for corporate strategy and currently heads the Client Solutions Group at Numerix. This group is responsible for Product Management, Financial Engineering and Business Analysis. Prior to this, he has served in various roles in Quantitative Software Development, Financial Engineering and Client Services at Numerix. Before transferring to Numerix in New York City, he was the CTO for Numerix Japan LLC in Tokyo, heading the Pre-Sales and Financial Engineering teams for Asia. Prior to joining Numerix in 2003, Mr. Kancharla also worked with Merrill Lynch and GE Capital in Quantitative Finance and Product Development roles.
He holds an MBA degree from New York University’s Stern School of Business, an MSc degree in Applied Statistics and Informatics from Indian Institute of Technology, Bombay and a BSc in Mathematics and Computers from the University of Mumbai.
Gary Mandelblatt, Managing Partner, NextGen Strategic Advisors
Gary Mandelblatt is a Managing Partner at NextGen Strategic Advisors and has over 35 years of experience working with financial institutions in managing market, credit and operational risks, as well as managing regulatory relations, implementing regulatory requirements, defining strategies and building businesses. During his career, Mr. Mandelblatt was the Chief Risk Officer for Nomura Americas and Chairman of Nomura’s Global Dodd-Frank Implementation program. Prior to Nomura, he was a Managing Director at the Lehman Brothers Estate where he was responsible for building the valuation capabilities for 1.2 million derivatives contracts and hedging open risk exposures. Mr. Mandelblatt was also the Global Head of Fixed Income Strategy at Lehman Brothers and helped build its commodities and emerging markets businesses. Before joining Lehman, he was Managing Director at Smith Barney, Salomon Smith Barney and Citigroup and was a senior Market Risk Manager for Fixed Income and supported numerous regulatory efforts. Prior to that, Mr. Mandelblatt was a consultant with Coopers & Lybrand and First Manhattan Consulting Group.
