Engagement Summary
The wholesale banking technology organization of a top 10 global commercial bank engaged Monticello Consulting Group (MCG) in late 2018 to help lead and manage the program to transition off Interbank Offered Rates (IBOR). The business outcome being sought was a transition of the bank’s wholesale loans business from IBORs to new alternate reference rates, such as the Secured Overnight Financing Rate (SOFR) in the US and Canada and the Sterling Overnight Index Average (SONIA) in the UK. MCG was brought in to advise on the program structure, define the target outcomes, and provide ongoing governance for the multi-year IBOR replacement program to prepare the bank to offer alternate reference rates to its wholesale lending customers in the US and European markets by the end of 2019, with other geographies to follow in 2020.
The MCG team designed a program governance structure to support multiple workstreams comprised of wholesale credit product owners, agile scrum delivery teams, developers and testing teams, as well as operational and business process owners. In addition, MCG supported senior leadership teams and program sponsors by providing ongoing management communications including the technology application roadmap, product and release management reporting, along with key risks and issues and overall program updates for steering committee decision-makers. The structure below summarizes the program governance implemented by MCG:
Project Background
Global regulatory standards published in 2018 require all financial institutions to discontinue issuing IBOR-based loans and derivative contracts by 2021 and replace these products with alternative reference rates based on regional requirements. To stay competitive in the wholesale lending market and maintain market share, our client is making significant technology and operational investments to be prepared to support SOFR and SONIA rates in lending contracts as early as Q2 of 2019. This program was initiated as a result of a combination of pending regulatory requirements and business efforts to remain competitive.
Engagement Objectives
Program Management:
Designed and stood up the IBOR replacement program governance structure for the wholesale banking technology organization. MCG advised on the design of an independent PMO to ensure all changes to the client’s systems and processes were delivered as required by the business, operations, and regulatory mandates for the IBOR replacement program.
Testing Governance:
Developed testing plans with technology and business teams to track the effectiveness of technology enhancements being introduced as a result of this program. Conducted multiple end-to-end testing cycles engaging application owners and project working groups within the wholesale credit line of business. Obtained stakeholders signoffs to allow software releases and new operational processes enablement.
Business Value
Monticello’s team, through a continuous partnership with wholesale banking technology and operations teams, positioned our client for success in developing the capability to offer alternative reference rates in wholesale lending contracts. Our rigorous program management and testing governance methodologies, end-to-end process understanding, aptitude for risk-sharing, and timely execution supported the tangible business outcomes for our client to be ready for this monumental shift in interest rate benchmark reform for global debt instruments.
