With the financial industry facing a future without Libor—which is currently being referenced in an estimated $200 trillion of financial contracts worldwide—American Bankers Association VP Hu Benton discussed how the industry is preparing on a recent episode of American Banker’s Bankshot podcast.
Benton noted that bankers “need to understand the economics for their business, they need to understand the impact on their customers . . . and they need to understand bread and butter management issues like: What do I have to do to change my management information systems? What do I have to do to reprogram my loan servicing system? What do I have to do to reprogram my risk management for my derivatives portfolio?”
He added that bankers are currently in the process of examining their existing contracts that reference Libor, and participating in dialogues with ABA and other industry associations about the path forward. “You really can’t underestimate the amount of time it takes to do that right,” he said. “And doing it right is really important if you’re talking about financial stability.”