Singapore banks urged to aim for transition out of SOR by Mar 31, 2023

Elysia Tan

Published Mon, Jul 18, 2022 · 03:14 PM

SINGAPORE’S banks are strongly urged to make reasonable efforts to actively transition out of or insert appropriate contractual fallbacks into all Swap Offer Rate (SOR) contracts maturing after Jun 30, 2023 by Mar 31, 2023, the steering committee for Sor & Sibor Transition to Sora said on Monday (Jul 18).

The objective of supporting Singapore Overnight Rate Average (Sora) adoption in cash and derivatives markets has been largely achieved, the steering committee said.

From March 2021 to March 2022, gross exposures to Sora derivatives rose from less than S$10 billion to more than S$1.136 trillion, overtaking the size of the SOR derivatives market.

Gross exposure to Sora loans have risen from less than S$4 billion to over S$62 billion across a broad range of small and medium enterprise, bilateral business and syndicated loans, as well as retail loans.

The committee added that while substantial efforts have and will continue to be placed on encouraging active transition from SOR to Sora, recent developments have mitigated the challenges associated with risk management and valuation of Fallback Rate (SOR) contracts.

It is thus “prudent and appropriate” to shift industry targets towards a sharper focus on risk management and the completion of contract remediation ahead of the discontinuation of SOR, it said.