27 September 2019

On 30 August 2019, the Monetary Authority of Singapore (“MAS”) announced the establishment of the Steering Committee for SOR Transition to SORA (“SC-STS”) which will oversee an industry-wide interest rate benchmark transition from SGD Swap Offer Rate (“SOR”) to Singapore Overnight Rate Average (“SORA”).

The Association of Banks in Singapore and the Singapore Foreign Exchange Market Committee (“ABS-SFEMC”) released a consultation report on 30 August 2019 that identifies SORA as the alternative interest rate benchmark to SOR, and sets out a roadmap for the transition. The consultation closes on 31 October 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 the sustainability of SOR, ABS-SFEMC have concluded that financial contracts that reference SOR, particularly SGD interest rate derivatives, should transition to reference SORA. 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 end-2021.

ABS-SFEMC envisages a phased transition from SOR to SORA over the next two years.

The SC-STS will be responsible for providing strategic direction on industry proposals to develop new products and markets based on SORA. The SC-STS will also engage with stakeholders to seek feedback and raise awareness on issues related to the transition from SOR to SORA.

Reference materials

The following materials are available from the ABS website www.abs.org.sg and MAS website www.mas.gov.sg:

 

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Allen & Gledhill Regulatory & Compliance

To assist our clients with compliance matters, our consultancy arm, Allen & Gledhill Regulatory & Compliance, provides a range of services and solutions. Should you have any queries relating to compliance issues arising out of this development, please contact:

Lawrence Low
+65 6890 7448
lawrence.low@allenandgledhill.com