Interest Rate Benchmarks Transition
The London Interbank Offered Rate (LIBOR) is a global interest rate benchmark used to determine interest rates for various financial instruments.
Since the global financial crisis in 2008-2009, underlying transactions supporting LIBOR have fallen. On 5 March 2021, ICE Benchmark Administrator and confirmed that all LIBOR settings will either cease to be provided by an administrator or will no longer be representative:
- Immediately after 31 December 2021, in the case of all Sterling, Euro, Swiss Franc and Japanese Yen LIBOR settings, and the 1-week and 2-month US dollar (USD) LIBOR settings; and
- Immediately after 30 June 2023, in the case of the remaining USD LIBOR settings.
The Singapore Interbank Offered Rate (SIBOR) will similarly be discontinued immediately after 31 December 2024 to support the shift towards a SORA-centred SGD interest rate landscape. This will avoid market fragmentation, facilitate easier comparison of loan pricing, and promote the development of deep and efficient SORA markets in the long run.
The industry-wide transition of SGD interest rate benchmarks is overseen by the , which comprises senior representatives from the industry and MAS.
The transition to alternative reference rates (ARRs) will impact the pricing and valuation of financial instruments that FIs hold and offer to customers. FIs would no longer be able to reference LIBOR, SOR and SIBOR for charging interest on loans or paying interest on deposits once the benchmark ceases.
- FIs should ensure that its operating systems and business processes are ready to offer financial products based on the relevant ARRs to ensure a smooth transition to a new interest rate regime. As such, FIs should identify all impacted systems and undertake system upgrades where required.
- FIs should put in place detailed action plans for contract remediation (e.g. identifying contracts that reference LIBOR, SOR and SIBOR and working with customers to amend these contracts to ensure their continuity after the benchmark ceases).
We encourage customers to familiarise
What is replacing Interbank offered rates (IBORs)?
The National Working Groups have recommended the adoption of ARRs for their respective currencies. ARRs are overnight rates that are based on actual transactions in large underlying liquid markets.
Global Transition Roadmap
FSB’s sets out a timetable of actions to guide market participants with LIBOR exposures towards a smooth and timely LIBOR transition by end-2021. It also provides a summary of the key milestones published by industry working groups for USD, GBP, JPY, EUR and CHF LIBOR.