A large financial institution engaged Oakleaf to assist in the development and documentation of controls relating to a complex quarterly regulatory report that ...
Secured Overnight Financing Rate (SOFR) is a measure of borrowing cost that the majority of financial services participants selected as the new transaction reference rate to stand in for the mandated retirement of the longstanding London Interbank Overnight Rate (LIBOR). Oakleaf’s Client has hundreds of thousands of loans based on LIBOR for which they must accurately calculate interest rates each month using the old index. The Client also produces these calculations based on various tenors, which must also be changed and expanded upon to reflect the market and the Client’s pivot to SOFR. The company is accountable for making sure the calculation of interest based on that SOFR index is accurate on a monthly basis.
The client enlisted Oakleaf to assist with what is effectively a massive conversion project, the “LIBOR Transition Project” to update legacy loan databases and various corresponding systems. The focus of this project concerned the comprehensive examination and transformation of business processes to facilitate the Client’s transition away from the LIBOR index to SOFR via an enterprise-wide examination of the impact of this transformation on systems and processes associated with structured finance in mortgage securitization.
To assist with this colossal undertaking, Oakleaf provided business analysis, education, and requirements documentation expertise blended with in-depth understanding of the Client’s securitization processes — from pricing through disclosures and general business practices. Oakleaf performed impact assessments for over 70 stakeholder groups. The first challenge associated with this task was ensuring that stakeholder groups fully understood the nuances involved in converting systems and transactions for a transition in reference rate that had never been previously contemplated. Unlike most traditional information-gathering processes, this process required that Oakleaf ensure the full understanding of the impact on their business before proceeding to the solution.
The Oakleaf consultant also worked with the Client’s Systems Readiness Group to ensure the adequate documentation of system changes and adherence to SDLC requirements. We prepared strategic and business process impact vision documents with detailed steps to ensure the new SOFR rate can be consumed by the various systems. Oakleaf learned and worked within the Client’s change management processes and software and provided upstream/downstream impact analysis for stakeholders via production of visual aids to delineate all involved system interfaces. Oakleaf worked directly with the coders and provided requirements traceability back to code level and design of adequate test cases to support regulatory due diligence.