The Monetary Authority of Singapore (MAS) is expanding the mandate of the steering committee that is overseeing the Swap Offer Rate (SOR) transition to Singapore Overnight Rate Average (Sora).

MAS yesterday said the expansion of the mandate for this Steering Committee for SOR’s Transition to Sora (SC-STS) is to enable it to oversee the interest rate benchmark transition from the Singapore Interbank Offer Rate (Sibor) to Sora.

The move follows a joint industry report published yesterday, announcing the discontinuation of the remaining Sibor tenors in phases in the next four years.

The six-month Sibor will be discontinued three months after the six-month SOR is discontinued, while the widely used one-and three-month Sibor will be discontinued by the end of 2024.

In July this year, the Association of Banks in Singapore, the Singapore Foreign Exchange Market Committee and the SC-STS published recommendations to discontinue Sibor and shift to the use of Sora as the main interest rate benchmark for Singapore dollar (SGD) financial markets.

Sibor is a key interest rate benchmark in Singapore that is widely used in retail mortgages and corporate loans. Sora is published by MAS, and is based on the average rate of unsecured overnight interbank SGD transactions brokered in Singapore.

Yesterday, the response to feedback on July’s recommendations was published. The feedback came from 74 respondents, comprising 48 banks and 26 non-bank respondents. Most agreed for the Sibor transition to take place after the industry has substantially completed the SOR-to-Sora transition next year, the report noted.

On the six-month Sibor, most agreed with the proposal to discontinue it when, or shortly after, the six-month SOR is discontinued after the end of next year.

They cited the low use and lack of underlying activity as key reasons to discontinue the six-month Sibor before the one-month and three-month Sibor.

For the one-and three-month Sibor, most agreed with the proposal to discontinue them three to four years from the announcement date. This would give time for shorter-dated corporate loan contracts to mature, and also for longer-dated retail and SME (small and medium-sized enterprise) mortgage loans to exit their lock-in periods.

Some had proposed discontinuing the tenors only in five years or more, owing to its use in loans for buildings under construction (BUC loans), which may have some loans being disbursed after four years, due to Covid-19 delays.

But it was assessed that the potential complications from partially disbursed Sibor BUC loans can be managed.

With the expanded mandate, the committee will be renamed the Steering Committee for SOR & Sibor Transition to Sora.

The SC-STS plans to issue market guidance next year on approaches for the SOR to Sora transition.

Among other things, it plans to provide guidance in the first half of next year on an appropriate timeline to cease the use of Sibor in new contracts.