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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?
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: August 16 - 31, 2020
Key highlights from the current bi-weekly update:
- IASB has concluded on Phase 2 and has released the finalised amendments to IFRS. You can also refer to the PwC In Brief on Phase 2 amendments to IFRS.
- Singapore - The Monetary Authority of Singapore has auctioned off S$500m FRN tied to the Singapore Overnight Rate Average.
- The US - ARRC has updated their recommended fallback language for bilateral LIBOR business loans - adjusted simple SOFR will replace adjusted compounded SOFR and the removal of the amended approach.
- The US - ARRC has published transition resource guides for adjustable rate mortgages and private student loans.
- South Africa - The South African Reserve Bank’s (SARB) Market Practitioners Group Risk-Free Reference Rate Work Stream published its recommendations for alternative reference rates to replace the Johannesburg Interbank Average Rate (JIBAR).
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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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Contact us
Irene Liu
Partner, Risk & Regulatory, South East Asia Consulting, PwC Singapore
Tel: +65 9873 2234
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