Overview

The need to transition away from LIBOR and SOR arises from the global reform to improve the robustness and integrity of financial benchmarks. As part of this shift, the UK Financial Conduct Authority (“FCA”), the supervisory authority of LIBOR, announced on 5 March 2021, that all LIBOR settings will cease to be provided permanently or will no longer be representative from the following dates:

  • Immediately after 31 December 2021, with respect to all Sterling, Euro, Swiss Franc and Japanese Yen LIBOR settings, and the 1-week and 2- month USD LIBOR settings; and
  • Immediately after 30 June 2023, with respect to the remaining USD LIBOR settings.

As SOR utilises the USD LIBOR in its computation, the cessation of LIBOR will directly affect the sustainability of SOR.

For more information on why the banking industry is going through this change globally and for further details on the latest developments on this reform, please visit The Association of Banks in Singapore and The UK Financial Conduct Authority.

 

Alternative Rates

Currency

Alternative Rate

More Information

SGD
Singapore Overnight Rate Average (SORA) Click here
USD
Secured Overnight Financing Rate (SOFR) Click here
GBP
Sterling Overnight Index Average (SONIA) Click here
EUR
Euro Short-Term Rate (€STR) Click here
CHF
Swiss Average Rate Overnight (SARON) Click here
JPY
Tokyo Overnight Average Rate (TONA) Click here

Clients keen to find out more about Term SOFR as a viable Risk Free Rate can refer to this factsheet we have prepared.


What’s Replacing SOR

The Association of Banks in Singapore and Singapore Foreign Exchange Market Committee (“ABS-SFEMC”) released a consultation report that identified the Singapore Overnight Rate Average (“SORA”) as the alternative interest rate benchmark to SOR and set out a roadmap for this transition. The consultation closed on 31 October 2019, and the response paper to the consultation was recently released in March 2020.

What’s Replacing SIBOR

On 29 July 2020, The Association of Banks in Singapore (ABS), the Singapore Foreign Exchange Market Committee (SFEMC), and the Steering Committee for SOR & SIBOR Transition to SORA (SC-STS) issued a consultation report, titled SIBOR Reform and the Future Landscape of SGD Interest Rate Benchmarks. The report recommends the discontinuation of the SGD Singapore Interbank Offered Rate (SIBOR) in three to four years, and a shift to the use of the Singapore Overnight Rate Average (SORA) as the main interest rate benchmark for SGD financial markets. The announcement can be read here, while the report can be read here.

What’s Replacing LIBOR

LIBOR is expected to be replaced with overnight risk-free rates (“RFRs”). For example, in the UK, the Bank of England’s Working Group on Sterling Risk Free Reference Rates has recommended the GBP LIBOR replacement to be the Sterling Overnight Index Average (“SONIA”).


What Do I Need to Do?

Because LIBOR and SOR are used to calculate interest payments on loans, investments and derivative contracts, all these products will be impacted by the discontinuation of LIBOR and SOR.

If you have not already done so, it is important that you make your own assessment of the LIBOR and SOR exposures and contracts you have as it is likely these will need to be transitioned to RFRs in due course.

We encourage you to share this information with other colleagues in your organisation you believe should be kept apprised of these changes.

If you have at least one product with DBS that references LIBOR or SOR and matures after 2021, please be assured that there is no immediate impact on your product at this juncture, and we will be contacting you in due course to assist with the transition.

If you have any further questions, please speak to your Relationship Manager or contact us here.

 

DBS Announcements

Industry Announcements

UK FCA confirms LIBOR cessation dates

  • LIBOR cessation dates - UK FCA announced on 5 March 2021 that all LIBOR settings will cease to be provided permanently or will no longer be representative from the following dates:
    • Immediately after 31 December 2021, with respect to:
      • all Sterling, Euro, Swiss Franc and Japanese Yen LIBOR settings,
      • the 1-week and 2-month US Dollar LIBOR settings; and
    • Immediately after 30 June 2023, with respect to the remaining US Dollar LIBOR settings.
  • Index Cessation Event - The International Swaps and Derivatives Association (ISDA) has stated that the FCA’s announcement constitutes an Index Cessation Event under the ISDA 2020 IBOR Fallbacks Protocol and the ISDA IBOR Fallbacks Supplement, and the fallback spread adjustment for all LIBOR settings of all currencies and tenors published by Bloomberg are fixed as of 5 March 2021.

    For more information, please refer to ISDA’s press release.

Updated SC-STS timelines

The SC-STS and Monetary Authority of Singapore (MAS) announced the following new industry timelines:

  • All financial institutions to cease issuance of new contracts on non-USD LIBOR maturing after end December 2021 with exceptions allowed for risk management of existing positions
    • All new contracts issued before end June 2021 should have adequate contractual fallback provisions if contracts are maturing after end December 2021
  • All financial institutions to incorporate adequate contractual fallback provisions or transition to Alternative Reference Rates (ARRs) for all outstanding legacy non-USD LIBOR contracts that mature after end December 2021 by end September 2021
  • All financial institutions and customers to cease usage of SOR in new derivative contracts by end September 2021 with limited exceptions for risk management of legacy SOR positions
  • All financial institutions and customers to cease usage of SIBOR in new contracts by end September 2021
  • All financial institutions to cease issuance of new contracts on USD LIBOR with exceptions allowed for risk management of existing positions by end December 2021
    • All new contracts issued before end December 2021 should have adequate contractual fallback provisions

To recap all previously announced key milestones for the SGD Benchmark Transition:

  • All lenders and borrowers to cease issuance of SOR-linked new loans and securities that mature after end-2021 by end April 2021
  • 6M SIBOR will discontinue on 31 March 2022
  • All tenors of SOR will discontinue after 30 June 2023
  • 1M and 3M SIBOR will discontinue by the end of 2024
  • Fallback Rate (SOR) will discontinue after end 2024

For the latest industry announcements on the IBOR transition, please visit The Association of Banks in Singapore and The UK Financial Conduct Authority.

Industry Webinars

To view past industry webinars organised by The Association of Banks in Singapore on the IBOR transition, please click here.

 

DBS SORA Offerings for Corporate and Retail Customers

For SMEs: SME Property Loan Packages
For Retail Customers: Personal Home Loan Packages

 

Frequently Asked Questions

We know that you will have questions on the transition. We’ll keep you updated as more information becomes available.

Risk Free Rates (RFR) like SORA are essentially “backward looking” overnight interest rates derived from actual transactions which may be secured or unsecured. This is contrasted with SOR, which are published for different time periods (e.g., 3, 6, 12 months SOR) and are “forward looking”, i.e., published prospectively. Payments referencing RFRs are only known at the end of an accrual period while those referencing terms rates like LIBOR are known upfront at the start of an accrual period.

As such, RFRs are risk free because they neither include a term structure nor an interest offeror’s credit risk, both of which are factors in determining Term Rates.

Industry working groups around the world are exploring how RFRs may be used to replace the outgoing IBORs, including the use of such RFRs as possible fallbacks to existing products referencing such Term Rates.

DBS will be in touch at the appropriate juncture to update you on the alternative rates that will be used to replace SOR and existing IBORs, where applicable, in your existing products and services, when these alternative rates are finalised eventually.


DBS is actively engaged on various fronts to ensure a smooth transition away from IBORs (such as LIBOR) and rates referencing or linked to IBOR (such as SOR), in line with the impending discontinuation of such rates.

As this transition is happening at a different pace in each jurisdiction, DBS is actively monitoring and where possible, participating in such initiatives.

In Singapore, DBS participates in and leads several workstreams within the Steering Committee for SOR Transition to SORA, a steering committee established by the Monetary Authority of Singapore to oversee the industry-wide interest rate benchmark transition from SOR to SORA.

Internally, DBS is also adapting our products, systems and people to transition to the use of Risk Free Rates.

As the situation concerning this transition is still evolving and fluid, DBS is closely watching developments in this space and will, when appropriate, provide further updates on impact.


Assuming that there is no change to the cessation deadlines announced by the FCA, it is unlikely that IBORs such as LIBOR, and rates referencing to or are linked to IBOR, such as SOR, will continue to be used in existing products after the relevant cessation dates.

This is because IBORs such as LIBOR will cease to be published or will no longer be representative after the relevant cessation dates.

For SOR, the cessation of LIBOR will directly affect the sustainability of SOR as USD LIBOR is used in SOR’s computation. The SC-STS has also announced cessation milestones with respect to the use and/or publication of SOR.

For other affected IBORs, working groups and regulators in various markets have also recommended milestones for cash products and derivatives respectively (where applicable), to cease the use of LIBOR and/or impacted IBORs.

You should therefore be prepared to shift towards the use of RFRs in respect of your existing or new products as soon as practicable.


The need to transition from SOR arises from the global reform efforts to improve the robustness and integrity of financial benchmarks. In view of the 5 March 2021 FCA announcement, LIBOR will cease to be published or will no longer be representative after the relevant cessation dates.

As SOR utilises the USD LIBOR in its computation, the cessation of LIBOR will directly affect the sustainability of SOR.

In light of these developments, the Association of Banks in Singapore and Singapore Foreign Exchange Market Committee (ABS-SFEMC) released a consultation report that identified the Singapore Overnight Rate Average (SORA) as the alternative interest rate benchmark to SOR, and set out a roadmap for this transition. The consultation closed on 31 October 2019, and the response paper to the consultation was released in March 2020. Overall, there was broad support for the selection of SORA as the alternative interest rate benchmark to SOR, and the proposed transition roadmap.


SORA is published daily by the MAS and is a robust benchmark underpinned by a deep and liquid overnight interbank funding market. It is published on the MAS website daily and has been accessible at no charge since 1 July 2005. The historical series can be downloaded from the MAS website at https://secure.mas.gov.sg/dir/domesticinterestrates.aspx


“Any product using SOR and LIBOR as a reference rate will be affected. This could include derivatives, cash market products (e.g. business loans, syndicated loans, retail mortgages, floating rate notes, perpetual bonds and banks’ capital instruments), as well as outstanding debt securities with resettable interest rate features referencing SOR or LIBOR.

You should also review your existing financial documents and consider whether your investments and/or products (including loans) continue to serve their intended purpose.

If you had entered into certain transactions intending for them to serve as a hedge, DBS would like to remind you of the pre-existing basis risks in such transactions. Although such terms are already existing based on earlier instructed transactions and may not be directly impacted by the transition of SOR or LIBOR, you may wish to review your portfolio based on your individual circumstances. If in doubt, you may wish to seek independent advice as to whether there is any impact on each existing transaction as well as on your portfolio in its entirety."


Background

At the request of the Financial Stability Board’s Official Sector Steering Group and following several public consultations, the International Swaps and Derivatives Association (ISDA) published the IBOR Fallbacks Supplement and the ISDA 2020 IBOR Fallbacks Protocol (IBOR Fallbacks Protocol) on 23 October 2020 to facilitate the transition from LIBOR and other IBORs to RFRs, for legacy and new derivative trades.

 

Mechanics of IBOR Fallbacks Protocol

The IBOR Fallbacks Protocol enables adhering parties to amend the terms of their legacy Protocol Covered Documents by introducing new fallbacks based on RFRs (Fallbacks Amendments) for LIBOR, SOR and other Relevant IBORs referenced in the Protocol Covered Documents. Please refer to the IBOR Fallbacks Protocol for the full list of Protocol Covered Documents and Relevant IBORs.

These fallbacks will be triggered upon permanent discontinuation of the Relevant IBOR and, in the case of LIBOR, when LIBOR becomes non-representative. With respect to Relevant IBORs which are linked to USD LIBOR (e.g. SOR), the fallbacks will be triggered upon USD LIBOR’s discontinuation or when USD LIBOR becomes non-representative.

 

Adhering to the ISDA Fallbacks Protocol

The IBOR Fallbacks Protocol is now open for adherence via ISDA’s website. Please refer to the IBOR Fallbacks Protocol and the ISDA 2020 IBOR Fallbacks Protocol FAQs (in particular, paragraph 9 of the FAQs) for more information on how you can adhere to the IBOR Fallbacks Protocol and the adherence fees payable (if applicable to you). 

Industry bodies such as ISDA, the Alternative Reference Rates Committee, and in Singapore, The Association of Banks in Singapore and the Steering Committee for SOR Transition to SORA (SC-STS), have recommended its respective members to consider adhering to the IBOR Fallbacks Protocol, so that their legacy derivative contracts with other adherents can be amended to incorporate fallback arrangements to mitigate against the risks associated with the discontinuation or non-representativeness of a Relevant IBOR, in a globally consistent and industry aligned basis.

Please consult with your legal, financial, tax, accounting or other professional advisers you deem appropriate on the implications of adhering to the IBOR Fallbacks Protocol.

For a list of adhering parties to the IBOR Fallbacks Protocol at any juncture, please click here.

 

Reference materials on the IBOR Fallbacks Protocol and IBOR Fallbacks Supplement

For more information on the IBOR Fallbacks Protocol and the IBOR Fallbacks Supplement, including the Fallbacks Amendments, the list of Protocol Covered Documents and the Protocol adherence process, please refer to the following materials/resources:


The IBOR Fallbacks Supplement incorporates the Fallbacks Amendments to the relevant floating rate options in the 2006 ISDA Definitions. New derivative transactions which incorporate the 2006 ISDA Definitions and are entered into after the IBOR Fallbacks Supplement comes into force on 25 January 2021 will automatically include the terms of the IBOR Fallbacks Supplement, without further action required.

Reference materials on the IBOR Fallbacks Protocol and IBOR Fallbacks Supplement

For more information on the IBOR Fallbacks Protocol and the IBOR Fallbacks Supplement, including the Fallbacks Amendments, the list of Protocol Covered Documents and the Protocol adherence process, please refer to the following materials/resources:

For more FAQs, please visit the ABS website at: https://abs.org.sg/benchmark-rates/faq

For more FAQs on LIBOR Transition, please click here.

 

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Disclaimer

The information on this website has been prepared for general informational purposes only, and does not constitute legal, commercial or professional advice and should not be relied on as such. The information on this website is based on information or opinions obtained from sources believed to be reliable and to the maximum extent permitted by law, DBS Bank Ltd and/or its affiliates (“DBS Group”) do not make any representation or warranty (express or implied) as to its accuracy, completeness or correctness for any particular purpose. Please note that as this is an evolving space, there may be future developments that may affect the accuracy and currency of the information under this website. Accordingly, the information under this website may be changed from time to time without any further notice provided.

This website contains links to other third-party websites. The links to the third-party websites are provided as a matter of reference only. The DBS Group does not have control over such third-party websites, and does not assume any responsibility for the accuracy, completeness or correctness of the information provided on such third-party websites.

You should contact your own legal, tax or other professional advisors on the possible implications of the changes. The DBS Group does not accept or assume any liability for the information set out herein nor for any loss or damages of any kind incurred by you or anyone in connection with acting or refraining to act on such information. Information contained on this website may not be reproduced or disseminated, in whole or in part, without the prior consent of the DBS Group, and is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.