FAQs

The FAQs address MAS’ guidance on LIBOR transition, including scope, new issuances, over-the-counter (OTC) derivatives contracts and more.

For guidance on SOR and SIBOR transition, you may refer to the SC-STS website .

Scope

Does the MAS LIBOR transition timeline only apply to contracts booked in the Singapore entity?

With reference to MAS Circular on 23 April 2021 regarding the LIBOR transition timelines that FIs are expected to adhere to,

  • The expectations of the Circular (i) to cease issuance of new LIBOR contracts; (ii) to implement adequate contractual fallback provisions for new LIBOR contracts; (iii) on system readiness; and (iv) on principles of customer engagement, apply to business activities conducted out of the Singapore entity, regardless of where the contracts are booked.
  • The end-September 2021 deadline for all outstanding non-USD LIBOR contracts that mature after end-December 2021 to incorporate adequate contractual fallback provisions or be transitioned to ARRs would apply to all contracts booked in the Singapore entity.

New Issuances

What is the definition of “new contracts”?

With reference to deadline to cease issuance of ‘new contracts’ in MAS Circular on 23 April 2021,

  • For non-USD LIBOR contracts (excluding JPY LIBOR derivatives contracts), “new contracts” refers to contracts issued after 23 April 2021 (date of issuance of the Circular) and before end-June 2021. The expectation is that such contracts should already contain adequate contractual fallback provisions if they mature after end-December 2021, otherwise remediation should be done by end-September 2021. 
  • For JPY LIBOR derivatives contracts, “new contracts” refer to contracts issued after 23 April 2021 and before end-September 2021. The expectation is that such contracts should already contain adequate contractual fallback provisions if they mature after end-December 2021.
  • For USD LIBOR contracts, “new contracts” refer to contracts issued after 23 April 2021 and before end-December 2021.
With reference to deadline to cease issuance of ‘new contracts’ in MAS Circular on 23 April 2021, are customers able to drawdown on loans after the deadline to cease new issuance?
  • For non-USD LIBOR and USD LIBOR loan contract agreements that are signed on or before end-June 2021 and end-December 2021 respectively, the customers of the FIs can continue to draw down from these contract agreements on or after 1 July 2021 and 1 January 2022 for non-USD LIBOR and USD LIBOR respectively.
  • [Updated Dec 2021]  This applies to both committed and uncommitted facilities.
  • Nonetheless, the FI should actively transition these facilities or include adequate contractual fallback language as soon as possible, or, in any case by end-September 2021 for non-USD LIBOR contracts.
Are banks permitted to purchase USD LIBOR loans from the secondary market after 31 December 2021 where the purchasing bank is not an existing lender to the facility? New update as at Jan 22 
Banks are permitted to purchase USD LIBOR loans from the secondary market after 31 December 2021, provided that:
  • these USD LIBOR loans' documentations were completed before 31 December 2021; and 
  • adequate fallback arrangement or hardwired mechanism have been incorporated into the loan documentation if the loan matures after 30 June 2023

Banks should address the increase in legacy LIBOR exposures and contract remediation risks arising from secondary markets purchase activities in its internal risk management process by requiring (but not limited to):

  • senior management's review and approval for such activities
  • senior management as well as risk and control units to closely monitor the growth of legacy USD LIBOR risk to ensure that it does not overly burden the bank's available resource for contract remediation.
Would MAS consider a grace period for new USD LIBOR loans where discussions started on or before 31 December 2021, but signing of the deal is delayed until 1 January 2022 or after? New update as at Jan 22 

The default position is that all USD LIBOR-linked deals are to be signed and documented on or before 31 December 2021.

If the signing of the deal is not able to be completed by 31 December 2021 due to logistical or operational reasons:

  • Senior management reviews are required for exceptions, with the reason for delay clearly documented. E.g.
  • Acceptable: Last minute changes to legal terms for deal that has been under discussion since 1 October 2021.
  • Not Acceptable: Customer comes to bank for new USD loan on 28 December 2021, and discussions continue past end-December 2021.
  • Proper records and audit trail documenting senior management approval should be maintained and be made available to MAS for review upon request.

  • These exceptions should last no longer than 3 months after end-December 2021 (i.e. the deal must be signed by end-March 2022, with no more exceptions).
Can existing USD LIBOR loans (executed before 31 December 2021) that contain extension options, be extended without documenting a new loan? New update as at Jan 22 

USD LIBOR Loans signed on or before 31 December 2021 can be extended, if an extension option is embedded in the contract:

  • If the proposed extension matures on or before 30 June 2023, the extension can be either pegged to USD LIBOR, or an alternative benchmark, such as SOFR.
  • If the proposed extension matures after 30 June 2023, the extension must be pegged to an alternative benchmark, such as SOFR
For USD LIBOR loan agreements that were signed on or before 31 December 2021, can amendments to the loan be made on or after 1 January 2022? New update as at Jan 22 

Amendments to loan amount

  • USD LIBOR loans signed on or before 31 December 2021 can be amended for loan amounts if clauses in the original facility agreement already provides for increases in loan amount (i.e. accordion) and if not, senior management reviews are required for exceptions, with the reason for amendments clearly documented. Proper records and audit trail documenting senior management approval should be maintained and be made available to MAS for review upon request. These exceptions should last no longer than 3 months after end-December 2021 (i.e. a hard cut-off timeline by end-March 2022).

To bring in new lenders

  • The bank can bring in new lenders for loans signed on or before 31 December 2021 if transferability clauses were included in the original facility agreement.

Fallbacks

What is considered adequate contractual fallback provisions?

With reference to MAS Circular on 23 April 2021 regarding the requirement of ‘adequate contractual fallback provisions’ in contracts, adequate contractual fallback provisions refer to fallback arrangements that cater for a permanent discontinuation of the relevant LIBOR benchmarks, and facilitate an orderly transition to the adjusted versions of the respective ARRs as replacement rates.

Over-the-counter (OTC) Derivatives Contracts

How are reporting, trading, clearing, and non-centrally cleared margin requirements on OTC derivatives contracts affected?

OTC derivatives reporting

  • Benchmark transition may trigger reporting requirements for OTC derivatives contracts. Please refer to the FAQs on the Securities and Futures (Reporting of Derivatives Contracts) Regulations 2013.

OTC derivatives clearing and trading

  • OTC derivatives contracts referencing ARRs are currently not prescribed for clearing or trading requirements under the Securities and Futures (Clearing of Derivatives Contracts) Regulations 2018 and Securities and Futures (Trading of Derivatives Contracts) Regulations 2019, respectively. MAS will be reviewing the clearing and trading requirements of OTC derivatives contracts referencing ARRs and will consult on the proposed amendments in due course.

Margin requirements for non-centrally cleared OTC derivatives

  • Legacy OTC derivatives contracts that are amended solely to address interest rate benchmark reforms are not considered new derivatives contracts, and thus the MAS Guidelines on margin requirements for non-centrally cleared OTC derivatives contracts (SFA 15-G03) need not be applied to them.