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Reference Rate Reform in Singapore
LIBOR transition
The clock is ticking towards the end of LIBOR – are you prepared for the transition?
The global Financial Services industry has been preparing for an overhaul of key inter-bank interest rates used as reference rates in financial contracts. These changes are expected to result in the end of LIBOR by end-2021, and mid-2023 for certain USD LIBOR settings. Substantial work is in progress between regulators and the financial services industry to establish new replacement reference rates.
In Singapore, interest calculations on Singapore Dollar contracts typically reference either SIBOR or the Singapore Offered Rate (‘SOR’). The transition of SOR to the Singapore Overnight Rate Average (‘SORA’) will be triggered by the cessation of USD LIBOR in mid-2023. It has also been confirmed that SIBOR will be discontinued; 6m SIBOR on 31 March 2022 and 1m, 3m SIBOR by end-2024, and will require transition to SORA.
This is a monumental global change impacting lending, bond and derivative contracts in major currencies across virtually all industries. The transition to these new rates will require significant efforts by businesses to address the impacts on key activities, client interactions, control processes, systems, risk management and financial performance.
For those of us who remember the ‘Y2K’ event, in many ways this is a similar (but more real) systemic transformation that requires each organisation to prepare for it now.
31 December 2021
30 June 2023
Navigating the complex transition
As banks and corporates start to address the impact of LIBOR cessation and global benchmark reform, below is a simple illustrative self assessment for borrowers to assess your readiness.
How does your organisation fare?
How we can help
The transition from LIBOR is market, not regulator driven and institutions and territories are preparing at different rates. PwC’s LIBOR and reference rate reform specialists in territories throughout the globe can help you assess, prepare for, and execute on the transition. Wherever you are in your transition journey, we can work with you across the entire lifecycle of the transition, including:
- Program mobilisation and governance
- Systems and process change
- Impact assessment and transition planning
- Risk and valuation model changes
- Contract management and remediation
- Managing related tax and accounting implications
- Client and customer outreach and communications
Stay plugged in
LIBOR transition market update: 1-15 May 2021
Key highlights from the current bi-weekly update:
- The Alternative Reference Rates Committee (ARRC) held its second SOFR Symposium: The Final Year. Key discussion points: (page 1).
- Andrew Bailey, Bank of England Governor and John Williams, Federal Reserve Bank of New York President and CEO, in their opening discussion reiterated the need to use RFRs over alternative credit sensitive rates as they are the most robust replacement options to LIBOR.
- Panel discussion covered developments in the loan markets, including the use of SOFR as a lending rate and the prospect of a forward-looking term SOFR.
- ISDA's Annual General Meeting (AGM): LIBOR transition was a main topic at the AGM. Key highlights: (page 2)
- Day 1 featured a renewed call by the FCA’s Edwin Schooling Latter “to put the foot down on the accelerator", an update on the uptake of ISDA’s IBOR Fallbacks Protocol and an outlook on how liquidity in RFRs and other alternative reference rates may develop.
- Day 2 featured a panel discussion on LIBOR transition in Japan that touched on the potential adoption of term reference rates
- The ARRC published a set of qualitative indicators it expects to monitor as it is making a decision on the recommendation of a forward-looking SOFR term rate. (page 3)
- The UK’s HM Treasury published a summary of the outcome of its consultation on a potential legislative safe harbor associated with the use of synthetic LIBOR. (page 6)
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From LIBOR to SOFR: PwC’s virtual panel with Tom Wipf & David Bowman
How should you be thinking about the upcoming LIBOR transition? Join our virtual panel featuring David Bowman, Senior Associate Director at the Board of Governors of the Federal Reserve, and Tom Wipf, ARRC Chair and Vice Chairman of Institutional Securities at Morgan Stanley as we discuss real-world perspectives focused on:
- Key catalysts for SOFR liquidity building
- Jump-starting SOFR lending
- Risks in LIBOR Securities portfolio
- ARRC's legislative approach
- Approach for client outreach
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