The phaseout of the London Interbank Offered Rate (LIBOR) as a benchmark interest rate must be completed by the end of 2021. It is likely that by now, banks have established working groups to identify the scope of impacts, risks and regulatory requirements, and have begun to develop a practical migration plan.
An integral part of any plan is communication, both to affected external and internal stakeholders. Smart communication strategies can help make every touchpoint work harder to deepen client relationships. It’s not too early to get started.
Your project team needs to identify, measure, monitor and manage all financial and non-financial risks of the transition to whatever replaces LIBOR. They must develop processes for analyzing and assessing any alternative rates, as well as procedures for operational readiness. Regulators will be scrutinizing transition plans and exposures, and a well-documented transition plan will be important to share with them.
Building a comprehensive communications plan for your clients and other external stakeholders should follow these key steps:
- Identify the target audiences: Do you have a capital markets group offering derivatives, bonds and interbank lending products? Is LIBOR used for your commercial loans? Mortgages? Consumer loans? How many of your products will be affected by the benchmark rate change? What are the client groups, vendors and external partners that you will need to communicate to?
- Define the purpose of the communications: What do each of these external stakeholder groups need to know, and when do they need to know it? Can you explain the reasons for the rate transition and demonstrate any client impacts?
- Develop segmented messaging strategies: Each of your external stakeholders, from other banks to vendors to large corporate clients to residential mortgage holders, need to receive tailored communication based on what is relevant to them. In all cases, messaging must be clear, consistent and transparent.
- Utilize a multi-channel approach: Provide a positive client experience by delivering information in various channels and at varying times to ensure that any knowledge gaps are minimized. A mix of channels enables a cost-effective communication stream to the appropriate audience.
- Build a timetable that makes sense: Consider a series of well-timed communications to each group that achieves the right balance of too much information versus too little or too late information. If action is needed or if changes will be phased in, be sure to provide ample advance notice.
Keeping your employees informed and making sure they are well-prepared and trained is essential to a smooth LIBOR transition. Communications plans should be built on the following:
- Conduct an impact assessment: Identify the teams and departments that will be most affected by the benchmark rate change. What does each group need to know and when do they need to know it?
- Determine the purpose of the communications: Are you training the employees on new processes or procedures? Are you providing talking points for client-facing bankers so they can serve as an important resource for client questions?
- Define employee training needs: When is in-person vs. online training appropriate, and for which of your internal stakeholders? How soon does training need to begin? How will the effectiveness of training be measured?
- Provide useful tools: Create an easy-to-navigate resource guide – available online – that employees can reference to educate themselves on the transition timeline, changes and operational impacts they need to know.
- Connect the internal and external communications: Share all communications to your clients and other external stakeholders with your employees in advance. Your bankers need to be prepared to respond to client inquiries. In many cases, the bankers will be the ones to educate and inform their clients of the upcoming changes.
The LIBOR phaseout creates a complex communications challenge. Once the actual transition plan is determined, a comprehensive communications plan will define the goals, audiences, timing and tactical solutions for each stakeholder group. Thoughtful strategies ensure a smooth migration journey and can help make even matter-of-fact change communications into ones that support your brand and reinforce client loyalty.
Pamela Reich is director of communications strategy at MKP communications inc.
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