SOR to SORA Transition

An overview of interest rate benchmark reforms in Singapore
Globally, the variable rates that your business may use in determining interest payable or receivable on loans, derivatives and bonds are being replaced. This is expected to mean the end of LIBOR, SOR and a number of other global Interbank Offered Rates (‘IBORs’) by end of 2021. 

Regulators, and the financial services industry have established ‘risk free reference rates’ (RFRs) to replace these benchmarks. RFRs are based on overnight borrowing rates as opposed to LIBOR or SOR which are typically based on bank quotes for 1 month, 3 month or 6 month borrowing rates.

In Singapore, the Singapore Interbank Offered Rate (“SIBOR”) and SOR served as key interest rate benchmarks for decades for different users. SOR is predominantly used in bonds and loans to large institutions with hedging requirements, while SIBOR is mainly referenced in banking products for small businesses and retail customers. There is a separate consultation on the future of SIBOR that has just been completed and more information will be published in due course.

SOR represents the implied SGD cost of borrowing if USD are borrowed for the same maturity, and then swapped to SGD. As USD LIBOR is expected to be discontinued after December 2021 and is a key input in calculating SOR, SOR will also be discontinued at this time. The ABS and the SFEMC have identified SORA as an appropriate rate that no longer relies on USD foreign exchange markets, and is based on overnight borrowing transactions in Singapore Dollars. 

Available Resources
To help the industry navigate the transition, the Association of Banks in Singapore (ABS) and the Steering Committee for SOR Transition to SORA (SC-STS) have published 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:
  1. Overview on the Usage of SORA in Loans
  2. SC-STS End-user Checklist on Benchmark Transition
  3. SORA Market Compendium: Transition from SOR to SORA
  4. SORA - A Guide for Corporates and SMEs
In addition, ABS and SC-STS have also organised several web conferences covering the following topics:
  1. Industry Workshop on SOR Transition to SORA
  2. SOR Transition to SORA Roundtable: Interest Rate Landscape
  3. SOR Transition to SORA: Masterclass on Tax & Accounting
  4. SOR Transition to SORA Masterclass: A Corporate's Guide to SORA Transition
  5. Legal Masterclass on SORA Transition
The video-on-demand replays and presentation slides for the above web conferences are available for viewing on the ABS website.