Morgan Stanley's robots saved 50,000 hours of work, says report

Untangling trillions of dollars worth of loans and other financial contracts from Libor is a complex, expensive and time-consuming job. So, finance giants are turning to artificial intelligence to simplify and speed up a task mandated by regulators — and spare human lawyers some serious drudgery.

Morgan Stanley figures it has saved legal staffers 50,000 hours of work and $10 million in attorney fees by using robot Libor lawyers instead of only the human kind. Goldman Sachs Group Inc says computer algorithms sped things up “drastically.” These banks aren’t alone in adopting AI, and the revolution likely won’t stop with the Libor transition — but the number of contracts involved in this shift provides an ideal testing ground for the machines.

“We had a client that had 15 million queries and they were able to get all that answered within a quarter,” said Lewis Liu, chief executive officer at Eigen Technologies Ltd, which helped Goldman Sachs and ING Group NV deploy Libor-analysing software. “The alternative would have been literally an army of lawyers and paralegals over a year, or maybe two.”

This is all happening because a decade ago major banks were caught rigging Libor (London interbank offered rate). As a consequence, the benchmark is being switched off throughout the global financial system. Newly issued loans and other products cannot be tied to the rate after December 31, and it will be retired for dollar-based legacy products after June 2023.

So here come the bots. But even with AI, examining old documents to figure out how they change when Libor is swapped out for another interest-rate benchmark is costly. Major global banks are each spending at least $100 million this year on the job, according to Ernst & Young.