Steering committee unveils timeline to cease SOR-linked issuance

All lenders, borrowers are to cease issuance of SOR-linked products by end April 2021.

The Steering Committee for SOR Transition to SORA (SC-STS) has announced industry timelines to transition to the Singapore Overnight Rate Average (SORA) and shift away from the use of the SGD Swap Offer Rate (SOR) in financial products.

In a press release, the SC-STS said that by end-April 2021, all lenders and borrowers should cease the issuance of SOR-linked loans and securities that mature after 2021.

Domestic Systemically Important Banks (D-SIBs) must be be ready to offer a full-suite of SORA-based products to their customers by end-February 2021, said SC-STS.

Non-DSIB banks should be ready to offer new SORA-based products by end-April 2021.

Furthermore, by end-September 2021, all banks should also have substantially reduced gross exposures to SOR derivatives, including centrally cleared interbank transactions.

These timelines seek to steadily reduce exposures to SOR well before end-2021, in preparation for USD LIBOR and SOR discontinuation, whilst ensuring that SORA-based products are available to meet the financing needs of customers, the committee said.

After end-April 2021, SORA is expected to be the de facto floating rate benchmark for all institutional SGD financing activity. SOR is set to be discontinued alongside LIBOR discontinuation after end-2021.

Apart from the timeline, the committee also released a set of market guides to help users prepare for the shift away from SOR, and for adoption of SORA across a range of financial products.

These include a report on customer segments and preferences, which sets out how SORA can be used in loans. SC-STS also released a SORA market compendium, which provides market participants with a comprehensive overview of SORA market conventions across derivatives, floating ratenotes, business and retail loans, and outlines considerations for contractual andtechnical specifications of SORA products and contractual fallbacks for relevant SOR contracts.

Finally, the committee is also releasing an end-user checklist that was produced in collaboration with the Association of Corporate Treasurers Singapore (ACTS), Investment Management Association of Singapore (IMAS) and Life Insurance Association Singapore (LIA). This provides non-financial corporates, investment firms, insurers and other buy-side participants with a list of key steps needed to effectively implement the transition from SOR to SORA, and from LIBOR to alternative reference rates.