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GTreasury white paper highlights LIBOR replacement impacts on corporates

Corporate treasury organisations need to understand the impacts new Risk-Free Rates (RFR) will have on their businesses as RFRs roll out across the globe over the next two years, replacing LIBOR. To help companies adjust to the change, GTreasury has published a white paper, 'How Corporate Treasury Can Plan for LIBOR Replacement', which is available in full on the GTreasury website.

“The impacts of replacing LIBOR will be far reaching and not reversable,” says Peter Seward, GTreasury vice president of Market Development, Risk. “Corporate treasuries won’t be able to control when LIBOR will replace all their affected financial contracts, but they can be prepared to act on the impacts the change will bring about."

The white paper outlines actions companies and their treasury management system vendors need to take to smooth the transition. It highlights the following three major areas where change will require action:

  • Benchmark rate change - Where all financial instruments previously referencing LIBOR will now be governed by “fallback language” at the contract or agreement level.
  • Interest rate valuation curves and market conventions - Where new financial instruments will replace existing LIBOR-based and related financial instruments in the construction of discount curves.
  • Regulatory reporting - Where regulatory reporting requirements are affected by LIBOR replacement: hedge accounting (fair value; cash flow), interest rate sensitivity.

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