Reference Rate Reform in Singapore

LIBOR transition

The clock is ticking towards 31 December 2021 –
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 and most other global Inter-Bank Offered Rates (IBORs) by end of 2021. 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 LIBOR expected in December 2021.

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.

Impact of COVID-19 on the transition

Governments and regulators around the world have acted swiftly to allow organisations breathing room to tackle the sheer scale of COVID-19 impacts to businesses by delaying several key regulatory timelines. Many organisations were hoping for a similar reprieve on IBOR reform. However, this is not a regulatory change per se - and regulators have referenced ‘making a bad problem worse’ in their decision to leave the December 2021 timeline unchanged following COVID-19.

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?

Reference Rate Reform Self Assessment

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: 16-31 March 2021
Key highlights from the current bi-weekly update:

  1. In Singapore, SC-STS announced a new timeline for the end of issuances of new SOR derivatives and SIBOR-linked products. Firms are expected to end the issuance of new SOR based derivatives and SIBOR based contracts by the end of Q3 2021.
  2. Additional but differing messages on term reference rates have been provided across different markets (page 3)
    • The ARRC announced that they would not be in a position to recommend a SOFR term rate by the end of Q2 2021.
    • In Japan, Quick Benchmarks announced that it would start publishing the Tokyo Term Risk Free Rate (TORF) on 26 April 2021.
    • In the UK, FMSB published a draft standard which describes a set of principles intended to guide market participants to determine if they have a robust rationale to use term SONIA and provides some use cases.
  3. The UK’s PRA and FCA wrote to the CEOs and senior management accountable for LIBOR transition at the largest and most complex institutions. The letter indicated: (page 6)
    • they will intensify their supervisory focus on transition progress, and the management and oversight of risks associated with transition;
    • their expectation that variable compensation of senior management accountable for the transition should be influenced by the progress of the transition; and
    • their expectation on firms to cease issuance of new GBP LIBOR-based products after the end of Q1 2021, in line with RFRWG guidance.

Read the full update


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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

Watch the replay

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Contact us

Yura Mahindroo

Yura Mahindroo

Partner, PwC Singapore

Tel: +65 8182 5177

Irene Liu

Irene Liu

Partner, Risk & Regulatory, South East Asia Consulting, PwC Singapore

Tel: +65 9679 0938

Denise Lim

Denise Lim

Partner, Risk Assurance, PwC Singapore

Tel: +65 9616 7301

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