Singapore Announces SOR & SIBOR Derivatives to Cease by End-of-September 2021
Singapore | 1/4/21
The Association Bank of Singapore (ABS) and the Steering Committee leading the transition of SOR & SIBOR to SORA, has announced new timelines to cease issuance of derivatives & financial products linked to SOR and SIBOR by the end of-September-2021.
The timeline is to cease usage of SOR in new cash market products by end-April 2021, reduce SOR derivatives by end-September 2021 and SOR to discontinue in mid-2023 while for SIBOR, to discontinue 6-month SIBOR by March 202 and to discontinue 1-month and 3-month SIBOR benchmarks by end-2024.
” Singapore Announces SOR & SIBOR Derivatives to Cease by End-of-September 2021 “
About SOR, SIBOR and SORA
SOR is the Singapore Dollar (SGD) Swap Offer Rate and SIBOR is the Singapore Interbank Offered Rate. Both benchmarks are published by ABS Benchmarks Administration Co..
SORA is the Singapore Overnight Rate Average published by MAS (Monetary Authority of Singapore) and reflects the volume-weighted average rate of SGD unsecured overnight interbank lending transactions in Singapore. SORA is set to replace both SOR and SIBOR as the key interest rate benchmark referenced in SGD financial instruments.
The new timeline by end-of-September 2021: Transition from SOR & SIBOR to SORA
1) All financial institutions and their customers should cease usage of SOR in new derivatives contracts, except for specified purposes relating to the risk management and transition of legacy SOR positions to SORA.
This complements existing industry timelines to reduce the stock of outstanding SOR products ahead of SOR’s discontinuation in mid-2023, including to cease usage of SOR in new cash market products by end-April 2021, and for all banks to substantially reduce their gross exposures to SOR derivatives by end-September 2021.
- Cease usage of SOR in new cash market products by end-April 2021
- Reduce SOR derivatives by end-September 2021
- SOR to discontinue in mid-2023
Note: Although liquidity on SOR remains available till mid-2023, liquidity in SOR derivatives markets has started to decline and this trend will likely accelerate with the new cessation timeline on the use of new SOR derivatives. The Steering Committee strongly encourages market participants to take active steps to transition their SOR derivatives, loans and other contracts to SORA in 2021, when the liquidity conditions in the SOR-SORA basis swap markets is still expected to remain conducive.
Market participants that are unable to actively transition contracts by end-2022 should incorporate appropriate fallback arrangements and expect increasing difficulties in managing such positions as liquidity in SOR markets declines further.
2) All financial institutions and their customers should cease usage of SIBOR in new contracts. This is consistent with the preparation for the discontinuation of the less widely used 6-month SIBOR by March 2022, and the widely used 1-month and 3- month SIBOR benchmarks by end-2024.
There is no immediate impact on existing SIBOR loans. Banks will reach out to their customers at the appropriate time and provide sufficient notice for customers to consider switching these loans to other alternative loan packages.
- Discontinue 6-month SIBOR by March 2022
- Discontinue 1-month and 3-month SIBOR benchmarks by end-2024
The SC-STS report on “Timelines to Cease Issuance of SOR and SIBOR-Linked Financial Products” and previous publications can be found here. For further queries, please email ABS Co. at SORTransition@abs.org.sg or call +65 6224 4300.
LIBOR will Cease after 30th June 2023
As announced by ICE Benchmark Administration and the UK Financial Conduct Authority in March 2021, the widely referenced USD LIBOR settings will cease immediately after 30th June 2023. SOR, which is computed using USD LIBOR, will cease immediately after 30th June 2023.
Samuel Tsien, Group CEO of OCBC Bank, and ABS and Steering Committee Chairman:
” The industry has made significant progress over the past year to develop new SORA markets, including usage of SORA in a wide variety of cash market products and growing adoption in derivatives. Banks have been ramping up their preparations for the cessation of SOR usage in cash market products by end-April this year, and with that a shift to wider SORA usage.
With this latest move by the industry committing to cease issuance of SOR derivatives and SIBOR- linked products by end-September 2021, we look forward to a single SORA-centered interest rate benchmark regime, which will be beneficial to both customers and financial institutions for a more transparent and efficient market.”
Leong Sing Chiong, MAS Deputy Managing Director and Steering Committee Member:
” MAS supports SC-STS’ recommendations to further reduce reliance on SOR and SIBOR. Market participants should take active steps to shift both new use and legacy exposures to SORA, so as to minimise financial and operational risks as liquidity in SOR derivatives markets is expected to decline in 2022.
Financial institutions and their customers should make good use of the current window of opportunity to actively transition from SOR to SORA.”
SC-STS ~ The Steering Committee for SOR & SIBOR Transition to SORA1
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The Association of Banks in Singapore (ABS)
ABS is a non-profit organisation that represents the interests of the banking community in Singapore. In doing so, ABS works closely with the relevant government authorities towards the development of a sound financial system in Singapore. Since its establishment in 1973, ABS has promoted a unifying voice on banking issues. It has brought its members closer together through various guidelines and banking practices as well as the support of projects of mutual benefit to face the challenges of the financial and banking community in Singapore. Today ABS has a membership of 154 local and foreign banks.
ABS Benchmarks Administration Co. Pte Ltd (ABS Co) is an independent locally incorporated company fully owned by the Association of Banks in Singapore. It was established in June 2013 specifically to own and administer the ABS Benchmarks in Singapore – the Singapore Interbank Offered Rate (SIBOR), the Singapore Dollar Swap Offer Rate (SOR), the Singapore Dollar Spot FX and the Thai Baht Spot FX. ABS Co also administers the Fallback Rate (SOR).
Steering Committee for SOR & SIBOR Transition to SORA (SC-STS)
The Committee was established by the Monetary Authority of Singapore (MAS) to oversee the industry-wide interest rate benchmark transition from SOR to SORA in August 2019. The MAS subsequently expanded the Committee’s mandate in December 2020, to include the SIBOR-to-SORA transition as well, and renamed the Committee as the Steering Committee for SOR & SIBOR Transition to SORA (SC-STS)7. As the transition from SOR and SIBOR involves many industry participants, as well as commercial and retail customers, the SC-STS will ensure adequate stakeholder engagement and a well-managed transition.
Led by industry, the SC-STS is chaired by Mr Samuel Tsien, Group CEO of OCBC Bank and ABS Chairman. The Committee is responsible for providing strategic direction on industry proposals to develop new products and markets based on SORA. The Committee will also engage stakeholders to seek feedback and raise awareness on issues related to the transition from SOR and SIBOR to SORA. The Committee comprises senior representatives from key banks in Singapore, relevant industry associations, and MAS.
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