Steering Committee for SOR & SIBOR Transition to SORA announces further measures to boost SORA transition

25 February 2021

On 2 February 2021, the Steering Committee for SOR & SIBOR Transition to SORA (“SC-STS” or “Committee”) set out key steps to further advance the industry transition to a SORA-centered SGD interest rate market by end-2021. The Committee’s plans take into account the recent proposal by ICE Benchmark Administration (“IBA”) to extend the end-date for the widely referenced USD LIBOR settings to 30 June 2023.

The Committee noted that while the proposed extension for LIBOR discontinuation will allow more time for the transition of legacy contracts, UK and US authorities have continued to stress that the use of LIBOR in new contracts should cease as soon as possible. In view of this, the Committee has published an updated Transition Roadmap which sets out the following priorities for 2021/2022.

Broadening and deepening liquidity in SORA markets

The following three key SORA initiatives will be expanded to facilitate price discovery across longer tenors, and support further growth of SORA markets:

  • Extending central clearing of SORA derivatives for transactions of up to the 21-year tenor, from the five-year tenor currently.
  • Expanding the Monetary Authority of Singapore (“MAS”) SORA derivatives auction parameters to cover more key industry participants, and extend transaction tenors to 20-years, up from five-years currently.
  • Expanding the MAS SORA Floating Rate Notes (FRN) programme to include one-year and two-year tenors, from the six-month tenor currently.

Early cessation of new SOR and SIBOR contracts

The Committee reaffirmed its October 2020 industry guidance for lenders and borrowers to cease the use of new SOR-linked cash market products by end-April 2021. With new products increasingly referencing SORA, this will support further deepening of liquidity in SORA derivatives, as market participants manage and hedge interest rate risks.

The Committee will also set out guidance on timelines to cease the use of SOR in new derivatives contracts, and to cease the use of SIBOR in new loan contracts. The guidance will incorporate feedback from market participants and will be finalised in the coming months.

Supporting active transition of SOR-linked legacy contracts

The Committee noted that the likely discontinuation of SOR in mid-2023, following from IBA’s proposals, provides a longer time buffer for existing SOR-linked contracts to mature, and to manage the transition of legacy contracts that mature after mid-2023. Nevertheless, the Committee encourages market participants to actively transition such contracts to SORA early, taking advantage of the window where liquidity in both SOR and SORA derivatives markets still exist. The Committee will also publish a set of market guidance to support active transition of legacy SOR contracts to SORA by April 2021.

Reference materials

The following materials are available on the MAS website www.mas.gov.sg and the Association of Banks in Singapore website www.abs.org.sg: