MAS Consults on Adjustment Spreads for Conversion of SOR Contracts
The Monetary Authority of Singapore (MAS) and the SC-STS are jointly consulting, until June 10, 2022, on setting adjustment spreads for the conversion of legacy SOR contracts to SORA reference rate. SC-STS is the Steering Committee for Singapore Dollar Swap Offer Rate (SOR) and Singapore Interbank Offered Rate (SIBOR) Transition to Singapore Overnight Rate Average (SORA).
The consultation paper sets out recommendations for setting the MAS Recommended Rate, including the appropriate calculation methodology for the adjustment spreads to be used. The rate will apply as a fallback rate for outstanding SOR-based business loans and derivatives that mature after the end of 2024. The Steering Committee will provide supplementary guidance on adjustment spreads to support the industry’s ongoing active transition of wholesale SOR contracts. The consultation seeks feedback for proposals on:
- adjustment spreads for setting of the MAS Recommended Rate in International Swaps and Derivatives Association (ISDA) Interbank Offered Rate (IBOR) 2020 Fallbacks Protocol, Supplement number 70 to the 2006 ISDA Definitions and the 2021 ISDA Interest Rate Derivatives Definitions (collectively referred to as the “ISDA Documentation”), and the Steering Committee's recommended contractual fallbacks for bilateral and syndicated corporate loans. These fallbacks will apply after Fallback Rate (SOR) is discontinued after December 31, 2024
- supplementary guidance on adjustments spread for the period before and including December 31, 2024, which would be necessary to support the industry’s active transition from SOR
- application of the Steering Committee's supplementary guidance to active transition across various product types
The consultation focuses on the setting of adjustment spreads for the conversion of institutional SOR contracts (for example, bilateral and syndicated corporate loans, bonds, and derivatives) and does not affect earlier the earlier Steering Committee guidance on the setting of adjustment spreads for the conversion of legacy SOR retail loans to compounded-in-advance SORA.
Comment Due Date: June 10, 2022
Keywords: Asia Pacific, Singapore, Banking, SC-STS, SORA, SIBOR, SOR, IBOR Reform, Derivatives, Benchmark Reforms, Interest Rate Risk, Basel, Lending, MAS
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