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

    FDIC Proposes Amendments to Real Estate Lending Standards

    FDIC is seeking comments on a rule to amend the interagency guidelines for real estate lending policies—also known as the Real Estate Lending Standards.

    June 15, 2021 WebPage Regulatory News
    News

    MAS Amends Notices on Risk-Based Capital Adequacy Requirements

    MAS revised Notices 637 and 1111 on the risk-based capital adequacy requirements, along with Notice 656 on the exposures to single counterparty groups for banks incorporated in Singapore.

    June 14, 2021 WebPage Regulatory News
    News

    ISDA Consults on Implementation of Fallbacks for Certain Swap Rates

    ISDA is consulting on the implementation of fallbacks for the sterling LIBOR ICE Swap Rate and for the USD LIBOR ICE Swap Rate.

    June 11, 2021 WebPage Regulatory News
    News

    US Agencies Set Out Unified Agenda for Planned Regulatory Actions

    SEC announced that the Office of Information and Regulatory Affairs released the Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions.

    June 11, 2021 WebPage Regulatory News
    News

    BIS and BoE Launch Innovation Hub in London

    BIS and BoE launched the BIS Innovation Hub Center in London, which is the fourth new Innovation Hub Centre to be opened in the past two years.

    June 11, 2021 WebPage Regulatory News
    News

    ESRB Recommends Reciprocation of Certain Macroprudential Measures

    ESRB published recommendations on the reciprocation of macro-prudential measures in Belgium, France, Luxembourg, Norway, and Sweden.

    June 11, 2021 WebPage Regulatory News
    News

    MAS Amends Regulatory Notices Applicable to Banks in Singapore

    MAS revised multiple notices that are applicable to banks and merchant banks in Singapore and have been issued pursuant to the Banking Act (Cap 19).

    June 11, 2021 WebPage Regulatory News
    News

    EC Publishes Regulation on Key Aspects of Implementation of SA-CCR

    EC published the Delegated Regulation 2021/931, which supplements the Capital Requirements Regulation (CRR or Regulation 575/2013) with regard to the regulatory technical standards specifying the method for identifying derivative transactions with one or more than one material risk driver.

    June 10, 2021 WebPage Regulatory News
    News

    BCBS Consults on Prudential Treatment of Cryptoasset Exposures

    BCBS is consulting on preliminary proposals for the prudential treatment of cryptoasset exposures of banks.

    June 10, 2021 WebPage Regulatory News
    News

    EBA Revises List of Validation Rules for Reporting

    EBA issued a revised list of validation rules under the implementing technical standards on supervisory reporting.

    June 10, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7097