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.
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.
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?
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:
LIBOR transition market update: 16-31 March 2021
Key highlights from the current bi-weekly update:
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:
Partner, PwC Singapore
Tel: +65 8182 5177
Partner, Risk & Regulatory, South East Asia Consulting, PwC Singapore
Tel: +65 9679 0938
Partner, Risk Assurance, PwC Singapore
Tel: +65 9616 7301