MAS announced expansion of the mandate of the Steering Committee for Swap Offer Rate (SOR) transition to Singapore Overnight Rate Average (SORA), to enable it to oversee the interest rate benchmark transition from Singapore Interbank Offered Rate (SIBOR) to SORA. The Committee will be renamed as the Steering Committee for SOR and SIBOR Transition to SORA (SC-STS) and will be responsible for providing strategic direction and overseeing smooth implementation of the transition to SORA. This follows a joint industry report announcing the discontinuation of the remaining SIBOR tenors in phases over the next four years.
The joint industry report notes that, while growth in the SORA derivatives market has been encouraging, the underlying activity is still not sufficient to underpin a robust term-SORA benchmark. Other jurisdictions face similar challenges in the development of term benchmarks based on risk-free rate derivatives. As such, the development of a term-SORA market is unlikely in 2021 and remains uncertain thereafter. The SC-STS will integrate the work on SIBOR-to-SORA transition with its current roadmap for SOR-to-SORA transition, such that the transition of legacy one-month and three-month SIBOR contracts will take place after the key SOR-to-SORA initiatives have been substantially completed.
The industry report also presents the timeline for the SIBOR-to-SORA transition. In the first half of 2021, timeline will be announced to cease usage of SIBOR in new contracts. Nevertheless, banks may face operational resource constraints if they have to prepare for the simultaneous discontinuation of both benchmarks, six-month SIBOR will be discontinued three months after six-month SOR is discontinued. In the second half of 2022, the authorities would explore transition approach for one-month and three-month SIBOR contracts and, by the end of 2024, one-month and three-month SIBOR will be discontinued. The SC-STS is fully committed to supporting the industry’s transition away from both SOR and SIBOR and will outline a roadmap for this, ahead of the end of 2021. SC-STS encourages market participants to shift away from usage of SIBOR as soon as possible, to reduce reliance on a benchmark that will be discontinued, and to contribute to the deepening of new SORA markets.
Keywords: Asia Pacific, Singapore, Banking, SORA, SIBOR, COVID-19, SC-STC, IBOR Reform, Derivatives, FED
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