LIBOR and SOR are expected to be discontinued after 31 December 2021.
Here’s how you may be affected.

Interbank offered rates (IBORs) are widely used interest rate benchmarks for various financial products, including but not limited to loans, bonds and derivatives. IBORs rely on rates submitted by panel banks. To improve the robustness and integrity of financial benchmarks, regulatory authorities around the world have announced the transition from IBORs to overnight risk-free rates (RFR) underpinned by actual transactions. LIBOR — the London Interbank Offered Rate — is expected to be discontinued after 31 December 2021.

The benchmarks transition is a complex process. Regulatory authorities and financial institutions involved in the transition are committed to ensuring a smooth transition for all end-users, given the impact it has on existing and new financial products.

These are the new benchmarks that have been identified:

  Current Benchmark New Benchmark
United Kingdom GBP LIBOR SONIA - Sterling Overnight Index Average
United States USD LIBOR SOFR - Secured Overnight Financing Rate
Euro Area EUR LIBOR ESTER - Euro Short-Term Rate
Switzerland CHF LIBOR SARON - Swiss Average Rate Overnight
Japan JPY LIBOR TONA - Tokyo Overnight Average Rate
Singapore SGD SOR SORA - Singapore Overnight Rate Average
SOR is a commonly used benchmark in Singapore. It is defined as the synthetic rate for deposits in SGD, which represents the effective cost of borrowing the SGD synthetically by borrowing USD for the same maturity, and swapping out the USD in return for the SGD. Given that SOR utilises the USD LIBOR in its computation, the cessation of USD LIBOR after 31 December 2021 will directly affect the sustainability of SOR.

The Association of Banks in Singapore (ABS) and Singapore Foreign Exchange Market Committee (SFEMC) have identified the Singapore Overnight Rate Average (SORA) as the most suitable interest rate benchmark to replace SOR. SORA has been published by the Monetary Authority of Singapore (MAS) since 2005, and is a robust benchmark that is underpinned by a deep and liquid overnight interbank funding market.

How will payments under my products be affected?

If payments under a product is calculated by reference to LIBOR or SOR and if such rate is permanently discontinued, the relevant contract needs to be reviewed to assess if the relevant consequences are specified in the terms of the contract. If not, parties will have to agree to apply a new benchmark or a “fallback” replacement rate in place of LIBOR or SOR upon its discontinuation so that the contract can continue to be effective.

Will I be disadvantaged because of the new benchmarks?

We are working to ensure that the transition is of minimal impact to you, financially or otherwise. Depending on the product being affected, the transition approaches may differ according to market developments and industry guidance. We will contact you to assist with the transition in due course.  

Depending on how the fallback replacement rate compares to LIBOR or SOR, payments under that contract may be more or may be less than they would otherwise have been.


A primer on new benchmark rates

Meet the replacement rates and get an understanding of what is being done in the US, UK, Europe and Singapore summary.


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