Supervisory Expectations

MAS expects all Financial Institutions (FIs) to comply with the transition timelines and adopt the principles on customer engagement. FIs should implement measures and allocate resources needed to achieve a smooth transition.

Transition Milestones in Singapore

LIBOR
To guide the industry, MAS has developed a set of transition timelines that FIs are expected to adhere to in their benchmark transition plans and execution.

Target timeline LIBOR Currency/Tenor Milestones
By 30 June 2021
Non-USD LIBOR contracts that mature after end-December 2021, excluding JPY LIBOR derivatives contracts Cease issuance of new contracts on non-USD LIBOR (excluding JPY LIBOR derivatives contracts)
- Applies to all new contracts maturing after end-December 2021. Exceptions allowed for risk management of existing positions.There may be limited circumstances where FIs need to enter into new contracts to risk manage and unwind existing positions. These circumstances could include: (i) transactions for risk management and reduction/transition of LIBOR transactions executed before end-June 2021 for non-USD LIBOR currencies (excluding JPY LIBOR derivatives contracts), before end-September 2021 for JPY LIBOR derivatives contracts, and before end-December 2021 for USD LIBOR; (ii) market-making in support of client activity related to LIBOR transactions executed before end-June 2021 for non-USD LIBOR currencies (excluding JPY LIBOR derivatives contracts), before end-September 2021 for JPY LIBOR derivatives contracts, and before end-December 2021 for USD LIBOR; (iii) novation of LIBOR derivatives transactions executed before end-June 2021 for non-USD LIBOR currencies (excluding JPY LIBOR derivatives contracts), before end-September 2021 for JPY LIBOR derivatives contracts, and before end-December 2021 for USD LIBOR; (iv) transactions executed for required participation in central counterparty (CCP) procedures.

Fallback implementation for new contracts
- All new contracts issued before end-June 2021 should have adequate contractual fallback provisions if contracts are maturing after end-December 2021.
All LIBOR currencies and tenors System readiness
- System readiness to support fallback rates based on alternative reference rates (ARRs) as well as offer products referencing ARRs.
By 30 September 2021
JPY LIBOR derivatives contracts that mature after end-December 2021 Cease issuance of new derivatives contracts on JPY LIBOR
- Applies to all new contracts maturing after end-December 2021. Exceptions allowed for risk management of existing positions.[1]

Fallback implementation for new contracts

- All new contracts issued before end-September 2021 should have adequate contractual fallback provisions if contracts are maturing after end-December 2021.
Non-USD LIBOR contracts that mature after end-December 2021 Fallback implementation and legacy transition
- All outstanding contracts to incorporate adequate contractual fallback provisions or be transitioned to ARRs.

Additionally, FIs should identify contracts that will not be successfully remediated by end-December 2021 as soon as possible. Actions should be taken before end-December 2021 to mitigate the risks and impact from these contracts not transiting in time. Such actions should include appropriate client engagements and agreement to address and mitigate these risks.
By 31 December 2021 USD LIBOR
Cease issuance of new contracts on USD LIBOR
- Applies to all new contracts. Exceptions allowed for risk management of existing positions[1]

Fallback implementation for new contracts
- All new contracts issued before end-December 2021 should have adequate contractual fallback provisions.
SOR and SIBOR
SC-STS had announced timelines on 27 October 2020 and 31 March 2021 to coordinate the financial industry’s shift away from the use of SOR and SIBOR in financial products, and to concurrently accelerate usage of SORA. SC-STS also published on 29 July 2021 a set of recommendations for the transition of legacy SOR contracts , and finalised on 18 July 2022 the key settings of the MAS Recommended Rate (MRR) as well as supplementary guidance for active transition of wholesale market SOR contracts. MAS fully supports SC-STS’s timelines and its industry guidance to prepare for the discontinuation of SOR and SIBOR, which would facilitate a successful transition to a SORA-centred interest rate benchmark regime.
Target timeline Benchmark  Milestones
By 28 February 2021 SORA Domestic Systemically Important Banks (“D-SIBs”) to offer a full-suite of SORA-based products to their customers.
 Test    
By 30 April 2021

SORA 

Non-DSIB banks to offer a full-suite of SORA-based products to their customers. 

SOR All financial institutions and their customers to cease usage of SOR in new loans and securities that mature after 31 December 2021. 
By 30 September 2021 SOR All financial institutions and their customers to cease usage of SOR in new derivatives contracts, except where necessary for risk management and to support the transition from legacy SOR exposures.

Banks should reduce their gross SOR derivatives exposures with other financial institutions to 20% The numerator refers to all SOR derivatives exposures (including transactions that have had their last SOR fixing set on or before 30 September 2021). The denominator refers to a bank’s outstanding SOR derivatives exposures as at 31 December 2019..
SIBOR  All financial institutions and customers to also cease usage of SIBOR in new contracts.
By 31 March 2023 SOR New update as at Jul 22Banks are to ensure reasonable efforts are made to either actively transition out of, or to insert appropriate contractual fallbacksAppropriate contractual fallbacks include: a)  Contracts with hardwired fallback language/rate switch mechanism to SORA; b)Contracts that have incorporated the fallback waterfall to Fallback Rate (SOR) after 30 June 2023, followed by MRR, or other applicable fallbacks (as necessary); and c)  Contracts that contractually permit fallback to bank’s cost of funds (COF), and where customer has expressly agreed that such a fallback to COF is agreeable. into all SOR contracts maturing after 30 June 2023SOR contracts maturing on or before 30 June 2023, or whose final interest rate fixing occurs on or before 30 June 2023, are not included as such contracts would not require remediation before maturity.




Principles on customer engagement

FIs are expected to put in place comprehensive communication plans to help their customers prepare for the transition. A robust channel for customers to make enquiries and provide feedback will reduce the potential for disputes and reputational risk. 

To this end, FIs’ communication strategy should take into account MAS’ Guidelines on Fair Dealing, and adhere to the following principles:

1. Tailor engagement plans to different customer segments

A successful communication plan takes into account varying levels of financial sophistication and employs appropriate communication channels for different customer segments. FIs should provide clear, relevant, adequate and timely information to customers to raise their awareness of the transition and the economic differences between Inter-bank Offered Rates and ARRs. FIs should also provide clear explanations on the impact of the transition on customers’ contracts and the risks that customers may be exposed to.

2. Provide meaningful options and information to support decision-making 
Where relevant, FIs should present customers with suitable options to transition their existing contracts or introduce adequate fallback provisions. The options should be accompanied by clear and easy to understand information on the implications of each option (including the benefits, costs and risks) to help customers evaluate the suitability of the options to their needs. Additionally, FIs should give customers a reasonable amount of time to evaluate the available options and make informed decisions.
3. Provide adequate customer support channels
FIs should provide customers with effective channels to seek clarification and assistance for contract negotiations. FIs should also ensure that all customer-facing staff are well-trained and equipped with up-to-date information to explain the transition, represent the available options and their implications, and handle enquiries. While FIs should proactively address their customers’ concerns, they should also establish adequate dispute management mechanisms to promptly address complaints and disputes, and provide for fair resolutions that duly consider customers’ interests.

FAQs

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