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Secured Overnight Financing Rate and Beyond: The New Benchmark - Expectations and Implications


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In this new Accenture Finance & Risk presentation we make the case for the Secured Overnight Financing Rate benchmark, assessing its impact and suggesting actions financial firms should consider.

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Secured Overnight Financing Rate and Beyond: The New Benchmark - Expectations and Implications

  2. 2. CONTENTS Transition Timeline • Transition timeline laid out by the U.S. regulators for SOFR phase-in SOFR Overview • Features of the new benchmark Criticism of SOFR SOFR vs. LIBOR Why Replace LIBOR? • Overview of the shortcomings of LIBOR • Evaluation of SOFR and LIBOR against the benchmark standards set by the International Organization of Securities Commissions (IOSCO) • Summary of industry criticism against the new benchmark rate Case for a New Benchmark 2 Copyright © 2018 Accenture. All rights reserved. 2 Impact Summary • Brief summary of the nature of impact for each key area Impact Heatmap • Snapshot of key areas impacted by SOFR within buy- and sell-side institutions Next Steps • Getting ready for SOFR adoption Impact Assessment 3 Global Landscape • A snapshot of alternative reference rate for major world currenciesContext1
  3. 3. SECURED OVERNIGHT FINANCING RATE (SOFR) The 2012 London Inter-Bank Offered Rate (LIBOR) rigging scandal brought the concerns over the structural weaknesses of this benchmark into the mainstream. The Alternative Reference Rates Committee (ARRC) was convened in 2014 to establish an alternative benchmark, and on June 22, 2017, the selection of SOFR as the preferred alternative was made. SOFR represents the broadest set of REPO rates and is composed of the following segments:1 OVERVIEW Copyright © 2018 Accenture. All rights reserved. 3 TGCR Tri-party General Collateral Rate: Based on trade-level tri-party data BGCR Broad General Collateral Rate: TGCR + General Collateral Financing (GCF) repo SOFR Secured Overnight Financing Rate: BGCR + Fixed Income Clearing Corporation (FICC)-cleared bilateral repo + + What’s Changing? • IBORs are being phased out by 2021 – denominated in USD, GBP, EUR, JPY, and CHF2 • Key impact areas: Sales, Trading, Finance, Risk, Legal and Technology • Impact dimensions: liquidity; hedging and accounting; market, operational and conduct risk, and client outreach • For benchmark reform to be successful, there would need to be broad market adoption of the alternative risk-free rates such as SOFR, SONIA and others Why Act Now? • Andrew Bailey, Chief Executive of the FCA, believes “… the pace of that transition is not yet fast enough.” (July 12, 2018)3 • LIBOR replacement will impact USD 370 trillion in existing contracts that must be amended globally4 • How each bank will be impacted is uncertain, and multiple scenarios are possible • Significant change management efforts required for effective transition. Given the scale, project mobilisation and impact assessments should mobilize as soon as possible Note: Please see Legend slide for definition of acronyms 1 Introducing the Secured Overnight Financing Rate: (SOFR). FRBNY, November 2, 2017: 2 IBOR Global Benchmark Transition Report June 2018.ISDA, AFME, SIFMA, ICMA, 2018: 3 Interest rate benchmark reform: transition to a world without LIBOR. FCA, July 12, 2018: 4 The $370 Trillion Benchmark Challenge. ISDA, February 5, 2018:
  4. 4. SECURED OVERNIGHT FINANCING RATE (SOFR) Since the 2012 LIBOR fall-out, efforts are being made globally to find suitable reference rates for all major currencies. Below is a summary of the global landscape. GLOBAL LANDSCAPE Copyright © 2018 Accenture. All rights reserved. 4 Current Reference Benchmark Administrator Working Group Planned Reference Benchmark Borrowing Type O/N Rate Term Rate USD LIBOR¹ Federal Reserve Bank of New York Alternative Reference Rate Committee SOFR Secured Available by Q2 2018 To be established CHF LIBOR² SIX Swiss Exchange National Working Group on Swiss Franc Reference Rates SARON Secured Available To be established GBP LIBOR³ Bank of England Working Group on Sterling Risk- Free Rates SONIA Unsecured Available To be established JPY LIBOR⁴ Bank of Japan Study Group on Risk-free Reference Rates TONAR Unsecured Available To be established EURIBOR⁵ European Central Bank Newly established (July 2018) To be defined To be defined To be established To be established • The proposed alternative benchmarks are all overnight rates. • The rate also cover maturities running from overnight to many years in the future (term rates), as LIBOR currently provides. • The unsecured cost of a term loan is especially important to the Buy-side. • EONIA / EURIBOR is currently not compliant with the European Union Benchmark Regulation6 • After the EONIA redefinition was discarded, the ECB is viewed as best positioned (due to their comprehensive money market data) to create a robust (overnight) reference index6 • A working group has been established but timeline is tight as not only the production of a new rate is challenging but also the transition of contracts4 • Some of the overnight rates are unsecured with only a very small credit spread and some are secured and exclude credit risk completely • Especially in times of stress, secured and unsecured rates behave very differently – secured lending dries up. • The economic difference to LIBOR, as well as the structural differences among the secured overnight rates corresponding to various currencies raise additional complexity Term StructuresEUR Alternative4 Economic Differences Note: Please see Legend slide for definition of acronyms 1 Secured Overnight Financing Rate Data (Federal Reserve Bank of New York): 2 The National Working Group on Swiss Franc Reference Rates (Swiss National Bank): 3 SONIA Benchmark (Bank of England): 4 Study Group on Risk-Free Reference Rates – Payments and Markets (Bank of Japan): 5 Working group on euro risk-free rates (European Central Bank): 6 EONIA unlikely to meet the requirements of the European Benchmark Regulation (Linklaters):
  5. 5. SECURED OVERNIGHT FINANCING RATE (SOFR) In 2017, the U.K.’s Financial Conduct Authority (FCA) announced that banks will continue to support the LIBOR benchmark until the end of 2021, at which point a transition can be made to SOFR as an alternative benchmark rate.1 TRANSITION TIMELINE FOR SOFR (USD) • Despite significant improvements (e.g., submission controls, oversight committee) to LIBOR since 2013, the absence of an active underlying market poses in our view challenges to base rates on actual transactions • The ARRC has proposed SOFR, which is based on the overnight collateralized rate of daily repo transactions. SOFR is aligned with the International Organization of Securities Commission (IOSCO) Principles for Financial Benchmarks Timeline Dependencies • Establishing deep derivative markets to define the longer maturity points on the benchmark curve • Global adoption of SOFR as alternative benchmark rate and timeline harmonization • Regulatory guidance 20182 2019 2020 2021 U.S. FED Publishes SOFR Infrastructure For futures and/or Overnight Index Swap (OIS) trading SOFR Trading Trading begins in futures and OIS (bilateral / uncleared) that reference SOFR Central Counterparty (CCP) Benchmark Options CCP Benchmark Creation of a term reference rate based on SOFR-derivatives markets SOFR Trading Trading begins in cleared OIS that reference SOFR CCPs allow market participants to select reference rate CCPs no longer accept new clearing with EFFR as PAI and discounting Copyright © 2018 Accenture. All rights reserved. 5Note: Please see Legend slide for definition of acronyms 1 The future of LIBOR (Financial Conduct Authority): 2 The Alternative Reference Rates Committee (AARC):
  6. 6. LIBOR represents the unsecured inter-bank lending market which is experiencing reduced liquidity as market players switch to secured lending post 2007 crisis (around $500bn during the Financial Crisis to $68bn in February 2018).2 Diminishing Market Depth SECURED OVERNIGHT FINANCING RATE (SOFR) Today, LIBOR is linked to more than $370 trillion in financial instruments1 and has been used as the reference rate for over 30 years. However, the drying liquidity in the underlying markets, the lack of transaction traceability, and the regulatory landscape are driving the shift to an alternative reference rate. WHY REPLACE LIBOR? Copyright © 2018 Accenture. All rights reserved. 6 LIBOR is sustained by considerable use of “expert judgment” among the panel banks.3 The resultant subjectivity undermines the transparency of the benchmark. Subjectivity The growing regulatory pressure and stringent oversight on LIBOR may result in departure of participating banks from the panel. Also, the U.K.’s FCA has also indicated its commitment to replace LIBOR with an alternative reference rate by 2021.4 Future Uncertainty 1 The $370 Trillion Benchmark Challenge. (ISDA): 2 The Fed is trying to replace a decades-old benchmark rate — here's what you need to know (Business Insider): 3 The transition from LIBOR (International Capital Market Association): 4 The future of LIBOR (Financial Conduct Authority): Note: Please see Legend slide for definition of acronyms
  7. 7. SECURED OVERNIGHT FINANCING RATE (SOFR) SOFR VS. LIBOR Copyright © 2018 Accenture. All rights reserved. 7 In order to evaluate the proposals for alternative reference rates, the ARRC established five criteria in alignment with the principals for financial benchmarks defined by the IOSCO. ARRC Criteria SOFR LIBOR Benchmark Quality • 2017 H1 underlying transactions ~$800b1 • Fully (collateralized) transaction based and encompasses a robust underlying market / volume • Treasury repo markets seen as a resilient and active source of wholesale and interbank funding • FRBNY released 3 years of historical data for SOFR and is considering ways to release longer history • Suffering from lack of liquidity in the interbank markets whose pricing data are used to compute it (2017 H1 3- month LIBOR volume ~$500m*) • Calculated daily in 5 currencies (USD, EUR, GBP, JPY, CHF) and for maturities ranging from overnight to 1 year Methodology • Based on tri-party market, GCF market and DVP bilateral repo market. Uncleared bilateral repo is not included • SOFR rates provide hypothetical “perfect foresight” • Clearly defined data filters / rules and integrity controls for transparency • Theoretical rates formulated from pricing contributions by 17 panel banks (using “expert judgment” rather than transaction data), thus easier to manipulate • LIBOR value for the same date is a reflection of market expectations Accountability • Rates are calculated using actual market transaction for traceability and accountability • The inherent element of subjectivity (expert judgment) results in compromised accountability Governance • Governance and oversight is the cornerstone of the new benchmark • Governance and oversight was improved post 2012 LIBOR scandal Ease of Implementation • A 6-step Paced Transition Plan was proposed by ARRC to i. establish infrastructure ii. develop market for futures and uncleared OIS iii. develop market for cleared OIS iv. allow a choice for PAI / discounting based on SOFR v. establish liquidity and adequate historical data for risk modeling vi. establish a term reference rate • Trading activity in CME Group Inc’s SOFR futures and OIS will help establish long term curve points • LIBOR is well established as the primary benchmark for past 30+ years Criteria Definitions2 1. Benchmark Quality: Degree to which the benchmark design permits the integrity and continuity of the rate 2. Methodological Quality: Degree to which the benchmark construction could satisfy IOSCO Principles (e.g., soundness, standardization, transparency, availability of historical data) 3. Accountability: Evidence of process to allow compliance with the IOSCO Principles 4. Governance: Enhanced governance structure to promote the integrity of the benchmark 5. Ease of Implementation: Ease of transition i.e., hedging / trading market and term market 2 The Alternative Reference Rates Committee: 17/OConnorpresentation.pdf 1 Second Report - The Alternative Reference Rates Committee (ARRC): Note: Please see Legend slide for definition of acronyms
  8. 8. SECURED OVERNIGHT FINANCING RATE (SOFR) CRITICISM OF SOFR Copyright © 2018 Accenture. All rights reserved. 8 SOFR, while promising better transparency and market representation, still has in our view a few areas that would need improving before it replaces LIBOR as the gold standard benchmark for global financial markets. Rates Volatility SOFR has exhibited considerable high volatility during the initial few weeks of publishing. This is likely caused by the overnight repo rate fluctuation and is expected to steady over time with the aggregation of data. Term Structure SOFR is an overnight rate while LIBOR is a term benchmark. Longer maturities would require an appropriate forward curve supported by established derivative markets. Until a deeply liquid market is established, the adoption of SOFR as the primary benchmark is expected to stay under debate. Controls and Transparency New York Fed announced during the third week of publishing of SOFR rates that certain out of scope repo transactions were erroneously included in the SOFR calculation.1 Before SOFR claims the status of global USD benchmark, and to favor market confidence, the controls and data processes around SOFR should be further strengthened. Spread Variation SOFR spreads (SOFR-EFFR and SOFR-LIBOR) are heavily dependent on U.S. monetary policy. On average, the spread between SOFR and LIBOR is 23.7 basis points; and it nearly doubled between 2014 and 2017.2 Additionally SOFR volatility may occasionally be large enough to impact the month- average SOFR rate. Margining and Discounting There are significant variations in methods for margin interest calculations and discounting of SOFR-based products among clearing houses. CME Clearing is using SOFR while LCH Limited is using Fed funds rate for price alignment interest and discounting.3 Credit Risk Premium SOFR is a risk free rate that does not include the credit risk premium. This may lead to asymmetric rates on banks assets and liabilities during a credit crisis. Liquidity of Underlying Markets The repo markets underlying SOFR are also being questioned. GCF repos, that are included in SOFR, have declined 84% since 2011; whereas the bilateral repo market, not included in SOFR, is on the rise.4 Mandatory clearing of bilateral repos is likely to address the problem, but it is facing push back from industry participants. Transition Timeline The transition timeline from LIBOR to SOFR is criticized by some market participants for being aggressive. LIBOR is a mature benchmark supporting several trillion dollars in existing contracts. It is also well embedded in the risk management, regulations, and legal and compliance within the global financial system (e.g. Basel accord, ISDA, etc.). The transition should occur naturally and in a phased manner rather than forced on to the system. Note: Please see Legend slide for definition of acronyms 1 U.S. Libor Replacement, Two Weeks After Debut, Has Some Issues (Bloomberg): 2 What is SOFR? (CME Group): 3 Clearers diverge on SOFR swaps discounting ( 4 Libor’s sunset sees US repo market cast a longer shadow (
  9. 9. SECURED OVERNIGHT FINANCING RATE (SOFR) CHALLENGES AND IMPACTS The replacement of LIBOR poses multiple challenges to financial institutions. The impact of these challenges can be grouped into 3 key areas. Liquidity is paramount to broad market adoption of new rates as a replacement benchmark. This is most important for new products. Liquidity Client Outreach Hedging Risk Scale Product and Trade Identification CHALLENGES All changes should be communicated to clients (cash and derivatives). This is a significant process, requiring agreement on all trades. Analysis and testing is required on hedging levels under potential new benchmarks. Large scale changes to rate curves, models and documentation poses significant operational and conduct risk. The scale of the transition (USD 370 trillion in derivatives)1 impacts a large client base, product range and numerous geographies, with different timelines for change. Identify all existing and new contracts impacted by LIBOR rates across derivates, cash products and lending. Determine all fall- back positions. AREAS OF GREATEST IMPACT Business & Legal Business profitability may change and the transition to new contracts should have an impact on line of business profit or loss. Legal should oversee contract renegotiations and changes to standardized documentation. Finance & Risk Internal models, risk exposures, hedge accounting (designation of hedged item and hedging instrument) and external disclosure should require changing. Infrastructure and systems should be suitable for the new benchmarks and the transition. IT & Operations Copyright © 2018 Accenture. All rights reserved. 9 1 The $370 Trillion Benchmark Challenge (ISDA): Note: Please see Legend slide for definition of acronyms
  10. 10. SECURED OVERNIGHT FINANCING RATE (SOFR) The introduction and adoption of SOFR is expected to significantly impact a firm’s business strategies, products, policies, processes and operations, data, and technology. IMPACT HEATMAP Copyright © 2018 Accenture. All rights reserved. 10 Impact Areas Enterprise Strategy 1. Corporate / Business Unit (BU) Strategy 2. Product Development 3. Profitability / Performance Management Ops 7. Cross Product Processing 7.1 Confirmations 7.5 Clearing and Settlement 7.6 Revenue Accounting and Control 7.2 Cash Management and Payments 7.7 Collateral Management 7.3 Inventory Management 7.8 Trade Lifecycle Management 7.4 Margining 9. Finance 9.1 Business Decision Support 9.2 Financial Control 9.3 External Reporting 9.4 Cost Accounting / Reporting 8. Asset Liability Mgmt. 8.1 Funds Transfer Pricing 8.2 Balance Sheet Management 8.3 Controlling / Reporting CoreCorp. 10. Risk Management 10.1 Market Risk 10.2 Credit Risk 10.3 Liquidity Risk 10.4 Operational / Other Risks Data&Tech 12. Technology 12.1 IT Strategy 12.2 Application Development 12.3 Application Management 12.4 Infrastructure 13. Data 13.1 Data Strategy 13.2 Meta- / Master-Data Mgmt. 13.3 Data Lineage 13.4 Data Warehouse / Data Lake CoreBusinessUnits 4. Trading 5. Corporate Finance Alternative Finance (PE/VC) Debt Capital Markets Equity Capital Markets 5.1 Advisory 5.2 Issuance 5.3 Complex Finance 6. Lending Working Capital Finance Term Finance Structured Finance 6.1 Origination (Relationship Management) 6.2 Pricing 6.3 Disbursement and Repayment 6.4 Collection 11. Oversight, Legal, Reg 11.1 Compliance 11.2 Audit 11.3 Legal High Impact Moderate Impact Low or No Impact A B C D E GF 11.4 Regulatory Equities Fixed Income Structured Products IR & Credit Derivatives FX & Money Markets Equity Derivatives 4.2 Trading Risk Management 4.1 Product Structuring 4.3 Pricing 4.4 Quotes and Orders 4.5 Research Commodi- ties Note: Please see Legend slide for definition of acronyms
  11. 11. SECURED OVERNIGHT FINANCING RATE (SOFR) IMPACT SUMMARY (1/2) Copyright © 2018 Accenture. All rights reserved. 11 Enterprise Strategy 1. Corporate / BU Strategy ▪ Likely shift in competitive landscape and market equilibrium (established as a result of stabilized pricing over the past years) during the initial few periods as market players focus on introducing SOFR-based products M 2. Product Development ▪ New lending and investment product offerings (primarily wholesale) based on SOFR H 3. Profitability / Performance Management ▪ Buy-side: Revised / new pricing strategies and profitability targets as the spreads are moved due to new SOFR benchmark rate ▪ Sell-side: Revised fee and commissions structure for new products and services ▪ Potentially tightened margins as SOFR benchmark is higher than LIBOR (Avg. 23.7 bps for O/N – varies with US monetary policy1) ▪ Revised profit attribution process and performance benchmarks considering the SOFR baseline and volatility M Core Business Units 4. Trading ▪ 4.1 Product Structuring – New product offerings (vanilla and structured) based on SOFR H ▪ 4.2 Trading Risk Management – Updated trading risk models (settlement and pre-settlement) and associated processes H ▪ 4.3 Pricing – Revised / new pricing models for vanilla and derivative products to include SOFR-driven pricing variables H ▪ 4.4 Quotes and Orders – Updated quotes and order screens and processes to support SOFR-based products M ▪ 4.5 Research – Updated models and assumptions and curve construction impacting current research approaches M 5. Corporate Finance ▪ 5.1 Advisory – Capital structuring strategies impacted by the new short-term funding standard H ▪ 5.2 Issuance – Opportunity to offer new liquidity management tools and capital market instruments leveraging the SOFR H 6. Lending ▪ 6.1 Origination (Relationship Management) – Potentially higher than normal customer attrition during the initial periods (especially in retail sector) due to customers’ “stickiness” to legacy LIBOR standard H ▪ 6.2 Pricing – Opportunity to offer more “relevant” pricing for secured loan using SOFR (provides better representation of the secured lending market) H Operations 7.1 Confirmations ▪ Updated confirmations process (paper and electronic / SWIFT) to support the SOFR-based products H 7.4 Margining ▪ Uncertainty over margining methods used by clearing houses for SOFR-based products require strategies to manage the variances H 7.5 Clearing and Settlement ▪ Updated SWIFT messages / protocols to process the clearing and settlement of SOFR-based trades H 7.6 Revenue Accounting and Control ▪ Pricing and valuation volatility resulting from the publishing time difference between LIBOR and SOFR (Daily SOFR is published at 8 am NY time; whereas LIBOR is published at 4pm London Stock Market close) H 7.7 Collateral Management ▪ Updated collateral agreements and credit support annexes (CSAs) (please see 11.3 Legal). New valuation models for SOFR-based collaterals and supporting processes (allocations, valuations, inventory aggregation etc.) M A C B D E Note: Please see Legend slide for definition of acronyms 1 What is SOFR? (CME Group):
  12. 12. SECURED OVERNIGHT FINANCING RATE (SOFR) IMPACT SUMMARY (2/2) Copyright © 2018 Accenture. All rights reserved. 12 Core Corporate Functions 8. Asset and Liability Management ▪ 8.1 Funds Transfer Pricing – Revised Funds Transfer Pricing (FTP) models to address the product-specific add-ons (spreads) under SOFR H ▪ 8.2 Balance Sheet Management – Updated sensitivity models to evaluate the balance sheet impact of SOFR fluctuations M 9. Finance ▪ 9.1 Business Decision Support – New CFO strategies to manage the spreads and P&L volatility resulting from SOFR (which is observed to be more volatile than LIBOR during the first 3 months of publishing) H 10. Risk Management ▪ Revised risk policies, risk limits, portfolio review and control processes to cope with the changing products / BU risk profile under SOFR H ▪ 10.1 & 10.2 Market Risk and Credit Risk – Updated / new internal and regulatory models for credit and market risk as LIBOR (unsecured) and SOFR (secured) represent different market segments as well as corresponding exposure to credit risk H ▪ 10.3 Liquidity Risk – New metrics for funding and market liquidity management and sensitivity analysis to assess the impact of SOFR M 11. Oversight, Legal, Regulatory ▪ 11.1 Compliance – Revised / new internal controls, reconciliation, and review procedures to address the procedural, data, and technological nuances associated with SOFR M ▪ 11.2 Audit – Updated audit programs to address and certify the controls and process driven by SOFR M ▪ 11.3 Legal – Re-papered legal documentation (standard contracts, term sheets, ISDA / CSA agreements,1 and Service Level Agreements (SLAs) M ▪ 11.4 Regulatory – Interpretation and impact assessment of any potential regulatory requirements as a result of SOFR adoption H Data and Technology 12. Technology ▪ 12.1 IT Strategy – Assessment of implications of SOFR and prioritization of associated IT initiatives M ▪ 12.2 Application Development – Extension of system capabilities (front office, back office, and middle office systems) to handle SOFR- based products, workflows, and data feeds M ▪ 12.4 Infrastructure – Establishment of appropriate interfaces and staging layers to support SOFR data feeds M 13. Data ▪ 13.2 Meta- and Master-Data Management – Updated data models, constructs, and transmission protocols to support the new SOFR related data elements H ▪ 13.3 Data Lineage – Revised data lineage models to ensure traceability and accuracy of SOFR data (new data integrity controls). H ▪ 13.4 Data Warehouse / Data Lake – Accommodation of the SOFR data feed / timeseries for enterprise-wide consumption M F G 1 ISDA is currently working on developing fallback protocol language in the swaps agreement that may eliminate the need of re-papering of contractual documentation (consultation paper published on July 12, 2018) 2 ISDA Publishes Consultation on Benchmark Fallbacks (ISDA): Note: Please see Legend slide for definition of acronyms ISDA is currently working on developing fallback protocol language in the swaps agreement that may eliminate the need of re-papering of contractual documentation.2
  13. 13. SECURED OVERNIGHT FINANCING RATE (SOFR) NEXT STEPS FOR FINANCIAL MARKET PARTICIPANTS Copyright © 2018 Accenture. All rights reserved. 13 Assess Business Impact Carry out a detailed impact study from a business standpoint – evaluate impact on lines of business, products, services, and customers. Evaluate Front Office and Risk Management Readiness Assess the updates and revisions required in trading front-to-back processes, pricing and risk models, etc. to support the SOFR-based trading activities, portfolios and risk management. Identify the changes required in relation to trading and risk limits and internal controls. Review Finance and Product Control Review the finance and accounting processes (e.g. marking-to-market, repricing, discounting, margin calculations, etc.) and identify opportunities for revisions. Evaluate the changes required in supplementary processes, e.g. independent price verification (IPV). Develop Data and Technology Strategy Plan the strategic and tactical initiatives around data, systems, and infrastructure required to fully support SOFR. Evaluate Legal and Contractual Changes Identify the legal implications, e.g. revisions to standard terms and conditions, agreements, and other paper work. Develop strategies for replacing LIBOR-based derivative contracts with SOFR. Note: Please see Legend slide for definition of acronyms
  14. 14. LEGEND BGCR: Broad General Collateral Rate CCP: Central Counterparty Clearing House CSA: Credit Support Annex DVP: Delivery Versus Payment ECB: European Central Bank EFFR: Effective Federal Funds Rate EONIA: Euro Overnight Index Average EURIBOR: Euro Inter-Bank Offered Rate FCA: Financial Conduct Authority FICC: Fixed Income Clearing Corporation FRBNY: Federal Reserve Bank of New York FX: Foreign Exchange GCF: General Collateral Financing IBOR: Inter-Bank Offered Rate IR: Interest Rate ISDA: International Swaps and Derivatives Association OIS: Overnight Indexed Swap PAI: Price Alignment Interest PE: Private Equity SARON: Swiss Average Rate Overnight SONIA: Sterling Overnight Index Average SWIFT: Society for Worldwide Interbank Financial Telecommunication TGCR: Tri-Party General Collateral Rate TONAR: Tokyo Overnight Average Rate VC: Venture Capital Copyright © 2018 Accenture. All rights reserved. 14
  15. 15. THANK YOU To find out more: Accenture Finance & Risk: Accenture Finance & Risk Blogs: Copyright © 2018 Accenture. All rights reserved. 15 Contact us: Canada: Avinash P. Pimento: Managing Director, Accenture Finance & Risk Usman Raj: Senior Manager, Accenture Finance & Risk United States: Samantha Regan: Managing Director, Accenture Finance & Risk Ashley Davies: Managing Director, Accenture Finance & Risk Venetia Woo: Senior Manager, Accenture Finance & Risk Mairi Bryan: Manager, Accenture Finance & Risk Europe: Eva Maybud: Managing Director, Accenture Finance & Risk Ossip Hühnerbein: Senior Manager, Accenture Finance & Risk Adnan Niazi: Senior Manager, Accenture Finance & Risk Matthew Briddon: Manager, Accenture Capital Markets Umer Hamid: Manager, Accenture Finance & Risk James Monro: Manager, Accenture Capital Markets Authors: Usman Raj: Senior Manager, Accenture Finance & Risk Tony Liu: Consultant, Accenture Finance & Risk Special Thanks: Grace L. Chen and Isabelle C. Savoie
  16. 16. . Accenture, its logo, and High Performance Delivered are trademarks of Accenture. ABOUT ACCENTURE Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world’s largest delivery network —Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 449,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at DISCLAIMER This presentation is intended for general informational purposes only and does not take into account the reader’s specific circumstances, and may not reflect the most current developments. Accenture disclaims, to the fullest extent permitted by applicable law, any and all liability for the accuracy and completeness of the information in this presentation and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit, or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals. Copyright © 2018 Accenture All rights reserved. 16 SOFR AND BEYOND THE NEW BENCHMARK - EXPECTATIONS AND IMPLICATIONS