Temenos smooths banks transition from London Interbank Offer Rate (LIBOR) to Risk-Free Rates (RFRs)

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.

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Author: Karen Estcourt