Featured Product

    MAS Sets Up Committee to Drive Interest Rate Benchmark Transition

    August 30, 2019

    MAS announced establishment of the Steering Committee for transition of SGD Swap Offer Rate (SOR) to Singapore Overnight Rate Average (SORA). The committee will be responsible for providing strategic direction on industry proposals to develop new products and markets based on SORA. The committee will comprise senior representatives from the key banks in Singapore, the relevant industry associations, and MAS. MAS also published the list of committee members (Annex A). Moreover, the Association of Banks in Singapore (ABS) and Singapore Foreign Exchange Market Committee (SFEMC) launched, on August 30, 2019, a consultation detailing the roadmap for this transition. The consultation will end on October 31, 2019.

    SOR is a key interest rate benchmark in Singapore that is used in the pricing of SGD interest rate derivatives, commercial and retail loans, and other financial products. As the likely discontinuation of USD LIBOR will impact sustainability of SOR, ABS and SFEMC have assessed that financial contracts that reference SOR, particularly SGD interest rate derivatives, should transition to reference SORA. ABS and SFEMC envisage a phased transition from SOR to SORA over the next two years, starting with the deepening of new SORA-based markets and, thereafter, the transition of SOR-based legacy contracts. This will entail strong industry-wide cooperation and coordination on a range of initiatives, such as developing industry best practices and market conventions to promote the take-up of SORA-based products in financial markets and conducting outreach and education across various end-users to raise awareness. Thus, the Steering Committee was formed to engage with stakeholders to obtain feedback and raise awareness on issues related to the transition from SOR to SORA.

    ABS-SFEMC had studied various options and found SORA to be the most robust and suitable alternative benchmark to SOR, particularly for the SGD interest rate derivatives market, as it is a transaction-based benchmark underpinned by a deep and liquid overnight funding market. Given that SORA has been published by MAS since July 2005, this also provides a long historical time series that facilitates analysis for risk management and pricing purposes by market participants. The choice of SORA as the reference benchmark for SGD interest rate derivatives is also aligned with the global shift for derivatives markets to reference near risk-free rates. For SGD cash products (for example, loans) that currently reference SOR, ABS-SFEMC recommends that such products can continue to reference various interest rate benchmarks, including SIBOR, SORA, or banks’ internal funding rates. This is consistent with the current industry practice where SGD cash products use a broad range of interest rate benchmarks. USD LIBOR, which is used in the computation of SOR, would likely be discontinued following the announcement by the UK authorities that the benchmark will not be sustained by regulatory powers after the end of 2021.

     

    Keywords: Asia Pacific, Singapore, Banking, Securities, Swap Offer Rate, Steering Committee, LIBOR, Interest Rate Benchmarks, SOR, SORA, MAS

    Related Articles
    News

    BIS Report Notes Existing Gaps in Climate Risk Data at Central Banks

    A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.

    July 29, 2022 WebPage Regulatory News
    News

    EBA Publishes Multiple Regulatory Updates for Regulated Entities

    The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022.

    July 29, 2022 WebPage Regulatory News
    News

    APRA Consults on Prudential Standard for Operational Risk

    The Australian Prudential Regulation Authority (APRA) is seeking comments, until October 21, 2022, on the introduction of CPS 230, which is the new cross-industry prudential standard on operational risk management.

    July 28, 2022 WebPage Regulatory News
    News

    EC Amends Rule on Securitizations; ESRB Updates Reciprocation Measures

    The European Commission published a Delegated Regulation 2022/1301 on the information to be provided in accordance with the simple, transparent, and standardized (STS) notification requirements for on-balance-sheet synthetic securitizations.

    July 27, 2022 WebPage Regulatory News
    News

    APRA Announces Revisions to Capital Framework for Banks

    The Australian Prudential Regulation Authority (APRA) is announced revisions to the capital framework for authorized deposit-taking institutions to implement the "unquestionably strong" capital ratios and the Basel III reforms.

    July 26, 2022 WebPage Regulatory News
    News

    EBA Examines Remuneration Data and Use of Large Exposure Exemptions

    The European Banking Authority (EBA) published a report that examines the use of certain exemptions included in the large exposures regime under the Capital Requirements Regulation (CRR).

    July 22, 2022 WebPage Regulatory News
    News

    UK Authorities Publish Discussion Paper on Critical Third Parties

    The Bank of England (BoE), the Prudential Regulation Authority (PRA), and the Financial Conduct Authority (FCA) published a joint discussion paper that sets out potential measures to oversee and strengthen the resilience of services provided by critical third parties to the financial sector in UK.

    July 22, 2022 WebPage Regulatory News
    News

    BoE Issues Update on Ongoing Data Transformation Program

    The Bank of England (BoE) issued a communication to firms to provide an update on the progress of the joint data transformation program—which is being led by BoE, the Financial Conduct Authority (FCA), and the industry—for the financial sector in UK.

    July 21, 2022 WebPage Regulatory News
    News

    EBA Issues Draft Methodology and Templates for 2023 Stress Tests

    The European Banking Authority (EBA) published the draft methodology, templates, and template guidance for the European Union-wide stress test in 2023.

    July 21, 2022 WebPage Regulatory News
    News

    EBA Issues SREP Guidelines and Standards for Investment Firms

    The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) jointly published the final guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) for investment firms.

    July 21, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8407