Article reports that market participants are reducing significant administrative tasks associated with LIBOR’s transition by compressing swaps and options contracts. “The compression method has become very attractive as a means of tearing up as many of these contracts as possible, because each one does come with a quantum of risk,” according to Alexander McDonald, CEO of EVIA. David Clark, chairman at the EVIA, warns against complete dependency on fallbacks. “The thing about the fallback is that it is a fallback, not a replacement [....] ISDA continues to do a crucial job in helping market participants to transition after the end of 2021, but it is not their responsibility to provide a replacement for LIBOR”
Article reports that for banks and major corporations transfer pricing is becoming a major issue following internal function reviews as part of the Libor transition preparations. According to EVIA’s Chairman, David Clark “transfer pricing is beginning to become a big issue for banks and major corporates. Internally you have a lot of transfer pricing, and this includes derivatives and balance sheet items”.
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