HKMA Endorses Industry Guidance to Support LIBOR Transition

The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR). The information note is jointly published by the Asia Pacific Loan Market Association (APLMA) and the Treasury Markets Association (TMA). The note not only sets out the key options available in the loan market to replace USD LIBOR but it also explains the characteristics of each of these options. Some bank customers, particularly smaller corporates, may not be familiar with the methods developed by the markets to derive the interest rates for loans and other financial contracts with longer tenors and may thus tend to defer their adoption of SOFR. The note is intended to assist these bank customers. HKMA expects authorized institutions to make effective use of this note and proactively engage their customers to help them transition to alternative reference rates as soon as possible.