JULY 2020 – Singapore – The benchmark interest rate reforms initially started in 2012 as a response to the London Interbank Offered Rate (LIBOR) rigging scandals and it has already been more than three years since the UK Financial Conduct Authority (FCA) announced the discontinuation of LIBOR after 2021. As of now, with less than one and a half years to go, we are approaching the major milestone of the permanent cessation of LIBOR publication after the end of 2021.
In Singapore, the Swap Offer Rate (SOR) and Singapore IBOR (SIBOR) are the current reference benchmarks for SGD denominated transactions. SOR relies on the USD LIBOR in its computation and will cease at the end of 2021. Therefore, the Singapore Overnight Rate Average (SORA), which is already published daily by the Monetary Authority of Singapore (MAS), is the designated benchmark rate going forward. SORA is currently only shown on an overnight basis and the Association of Banks in Singapore (ABS) has suggested that SGD denominated transactions can use SORA on a compounding basis to get 1M, 3M, and 6M. Recently, there has been the issuance of SORA denominated loan and medium-term notes. Over the next few years, it is expected that the SORA term structure will be developed. Similarly, other countries in Asia would also have to decide on their replacement benchmark rate.
In such a situation, our NtInsight®/NtSaaS™ series will be able to handle the changes in benchmark rates for all currencies. The existing ETL process will need to be modified whereby the following input files are updated to reflect the new benchmark rates:
- Update the risk factor master file and historical time series data to reflect the new benchmark curve
- Replace the details of transactions using LIBOR curve with the new benchmark curve
To support our clients, Numtech will also provide consultation services for the modification of ETL tools and the explanation of system logic for regulatory needs.
Regarding the shift from SOR to SORA in Singapore: