KBC Bank, a Belgium-based bank with operations across Europe, US and Asia Pacific, has chosen Finastra to help manage its transition through the upcoming interbank references rates changes. It has selected Fusion Loan IQ Alternate Reference Rates (ARR) module to manage new rates and to expand its lending business. The bank has also opted for the Fusion LIBOR Transition Calculator to help calculate rates ahead of the transition period.
Melinda Christens, Business Program Manager LIBOR Transition at KBC Bank said, “We’ve been using Fusion Loan IQ for a number of years, and have been impressed with the way the solution is able to continuously adapt over time, adding new functionalities in line with changing regulations. The transition away from LIBOR is daunting for most banks, but with the help of Finastra’s solutions we’re able to continue to calculate rates and embark on a smooth transition.”
Fusion Loan IQ is Finastra’s solution for commercial lending, powering 71% of all syndicated loans around the world. It alleviates the high costs of system and process redundancy within commercial lending operations, as well as increasing transparency, improving risk management and simplifying entry into new markets or business lines. The latest version of the solution, enhanced to support ARR, provides banks with core capabilities to issue new loans using the replacement rates, allowing them to begin to transition their existing LIBOR portfolio safely.
Fusion LIBOR Transition Calculator will help KBC Bank manage the transition before the ARR module is rolled out. It enables market participants to calculate their own ARR or Risk-Free Rates (RFR) and interest accruals. The calculator service independently accesses the ARR/RFR from external official sources, such as the Federal Reserve Bank of New York, for the secured overnight financing rate (SOFR). It then calculates compounded in arrears rates and daily non-cumulative compounded rates, along with corresponding interest accrual amounts for a set of inputs. Depending upon the rate method chosen, the calculator has the flexibility to calculate the daily compounding rates for the whole period or only for the end date. It follows Finastra’s Fusion Loan IQ ARR calculations, which gives market participants consistent and accurate results.
Built on FusionFabric.cloud, Finastra’s open innovation platform, the calculator’s open API facilitates the integration with systems that don’t yet have a solution in place for calculating ARR/RFR rates. This significantly reduces operational risk.
“The shift away from LIBOR is the biggest change the market has seen in lending over the last three decades. It is also a once-in-a-lifetime opportunity to innovate and serve customers better, and so the need for a flexible service that can expand over time is a must,” said Robert Downs, Global Head of Corporate and Syndicated Lending at Finastra. “Our Fusion Loan IQ ARR module and the transition calculator are designed to keep pace as ARR methodologies and conventions evolve, protecting our customers from risks associated with complex system changes and ultimately future-proofing their businesses.”