The London Interbank Offered Rate (LIBOR) was a global interest rate benchmark used to determine interest rates for various financial instruments. In Singapore, SOR and SIBOR were also widely used for various SGD denominated financial instruments.
LIBOR and SOR have been discontinued or are no longer representative across all currency and tenor settings. The industry has transitioned to the relevant overnight alternative reference rates (e.g. SOFR for USD LIBOR, SORA for SGD contracts), and the application of the relevant contractual fallback rates (e.g. Fallback Rate (SOR) for SGD contracts).The Singapore Interbank Offered Rate (SIBOR) will be discontinued immediately after 31 December 2024, supporting the shift towards a SORA-centred SGD interest rate landscape. These developments will reduce market fragmentation, facilitate easier comparison of loan pricing, and support the deepening and efficiency of SORA markets.
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 ARRs impacts both FIs and its customers. FIs are no longer able to reference LIBOR and SOR for charging interest on loans or paying interest on deposits.
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.
Customers with floating rate products such as loans, investments and derivatives contracts that still reference the impacted benchmarks (SOR/LIBOR) have to transition their contracts to reference the corresponding ARRs as soon as possible.
For customers with products referencing SIBOR, the SC-STS published its final recommendations on 30 June 2023 on the approach to convert SIBOR loans to SORA, in particular the setting of adjustment spreads to account for the difference between SIBOR and Compounded SORA. In addition, measures on fee waivers and loan rule exemptions were put in place to support customers in the transition from SIBOR.