Be it paying for an overseas purchase or sending money to a studying child, Telegraphic Transfer is the perfect tool to send foreign currency overseas in a timely and secure manner. The benefits of TT are:
On Demand rates are applied when purchasing or selling of demand draft, foreign cheque and etc. It is a cheaper method for payments made overseas and funds are cleared through our correspondents in major cities around the world.
Private Property Board Codes
Reference Rate |
Current Interest Rate ( % p.a. ) |
MR1 |
6.25 |
MR2 |
6.45 |
MR3 |
5.50 |
MR4 |
5.50 |
MR5 |
6.35 |
MR6 |
5.75 |
MR7 |
5.70 |
HP1 |
6.65 |
MRR |
5.75 |
MVR |
6.25 |
HDB Board Codes
Reference Rate |
Current Interest Rate ( % p.a. ) |
HB1 |
4.75 |
HB2 |
4.25 |
HB3 |
3.50 |
HB4 |
4.00 |
HB5 |
4.75 |
HH1 |
6.35 |
HBD |
4.75 |
HB6 |
4.25 |
Commercial Board Codes
Reference Rate |
Current Interest Rate ( % p.a. ) |
CR1 |
4.68 |
CR2 |
5.18 |
CR3 |
5.68 |
CR6 |
6.58 |
CR7 |
5.60 |
HC1 |
7.65 |
CRR |
5.20 |
Malaysia Property Board Codes
Reference Rate |
Current Interest Rate ( % p.a. ) |
MBR |
7.00 |
Premium Financing Overdraft |
Board Rate ( % p.a. ) |
SGD |
4.20 |
USD |
5.60 |
Overdraft is currently not available for new applicants.
Premium Financing Term Loan |
Board Rate ( % p.a. ) |
SGD |
4.20 |
Please note that both Overdraft and Term Loan board rates will be adjusted to the aforementioned with effect from 1 Aug 2023.
The London Interbank Offered Rate (LIBOR), which serves as an interest rate benchmark across a number of financial products, is expected to be discontinued by the end of 2021. LIBOR (in all its underlying currencies) is expected to be replaced with overnight risk-free rates (RFRs).
The transition from LIBOR to RFRs arises from the global shift to improve the robustness and integrity of financial benchmarks. As part of this shift, the UK Financial Conduct Authority, which acts as the supervisory authority for LIBOR, stated that it would no longer compel banks to submit rates used for the calculation of LIBOR after 31 December 2021.
Alternative benchmark rates have been identified by the respective jurisdictions/countries to replace LIBORs and are set out in the table below. These risk free rates are all overnight interest rate benchmarks, and are based on actual transactions which may be secured or unsecured.
LIBOR reform currencies |
Other RFR reform currencies |
||||||
USD |
EUR |
GBP |
JPY |
CHF |
SGD |
THB |
|
Legacy benchmark to discontinue |
USD LIBOR |
EUR LIBOR |
GBP LIBOR |
JPY LIBOR |
CHF LIBOR |
Singapore Swap Offer Rate (SOR) |
Thai Baht Interest Rate Fixing (THBFIX) |
Proposed alternative RFR |
Secured Overnight Financing Rate (SOFR) |
Euro short-term rate (€STR) |
Sterling Overnight Index Average (SONIA) |
Tokyo Overnight Average Rate (TONA) |
Swiss Average Rate Overnight (SARON) |
Singapore Overnight Rate Average (SORA) |
Thailand Overnight Repurchase Rate (THOR) |
Administrator of RFR |
Federal Reserve of New York |
European Central Bank |
Bank of England |
Bank of Japan |
SIX Swiss Exchange |
Monetary Authority of Singapore (MAS) |
Bank of Thailand (BOT) |
As the Singapore Dollar Swap Offer Rate (SOR) utilises USD LIBOR in its computation, the expected discontinuation of LIBOR by end-2021 would impact the sustainability of SOR. The Association of Banks in Singapore and the Singapore Foreign Exchange Market Committee (ABS-SFEMC) has identified the Singapore Overnight Rate Average (SORA) as the most suitable interest rate benchmark to replace SOR. SORA has been published by the Monetary Authority of Singapore since 2005.
Should our customers have loan(s) or derivatives contracts with us that reference LIBOR or SOR maturing after December 2021, this transition will impact them. This will require them transiting the LIBOR or SOR reference rate to the relevant RFRs of either SOFR for USDLIBOR or SORA for SGDSOR.
Our Bank’s representative or Relationship Manager will contact customers to assist customers with this transition, taking into account the industry’s guidance.
Customers may refer to the following websites to understand the current global reform, as well as the frequently asked questions on MAS and ABS’s websites for more information on the transition of SOR to SORA.
Monetary Authority of Singapore’s website on Interest Rate Benchmark Transitions:
https://www.mas.gov.sg/regulation/interest-rate-benchmarks-transition
UK Financial Conduct Authority’s website on transition from LIBOR:
The International Organisation of Securities Commissions’s website on a general background regarding benchmarks transition from LIBOR
The Association of Banks in Singapore’s (ABS) website on SOR to SORA transition:
https://abs.org.sg/benchmark-rates/sor-to-sora
https://www.iosco.org/library/pubdocs/pdf/IOSCOPD636.pdf
The Steering Committee for SOR & SIBOR Transition to SORA (SC-STS) and MAS have announced the following new industry timelines:
There is no immediate impact on your loan at this juncture. We will be reaching out to you in due course to assist with the transition. However, to prepare for the upcoming transition, you are encouraged to review the terms and conditions of your loan contract to understand the implications and the actions required.
We will be sending an official letter at the appropriate time for you to consider different options. You will also need to consider if replacing a SOR loan with other benchmarks impacts your related transactions (e.g. hedges) and the corresponding accounting and tax implications.
SORA and SIBOR are different SGD benchmarks that are determined on a different basis. In relation to the usage of SIBOR, ABS Benchmarks Administration Pte Ltd (ABS Co) is conducting a transitional testing for the enhanced SIBOR, and will provide an update after the transitional testing is completed in 2H 2020. The results of the transitional testing will be considered by the Steering Committee for SOR Transition to SORA (SC-STS), which will issue industry guidance in due course.
While SORA is not commonly used in the loan market, it is not new and has been published daily by the MAS since 2005. Over time, just like any new benchmark, e.g., when SOR was introduced, borrowers will become familiar with SORA, and its use in loans and other cash or derivatives products will increase.
When SOR/LIBOR is discontinued, we will no longer be able to calculate your interest payment using SOR. Instead, your loan interest payment will be calculated using a ‘fallback’ rate or other alternative provisions specified in the terms and conditions of your loan contract. You should start preparing for the transition as early as possible by reviewing the terms and conditions of your loan contract to understand the consequential implications and actions required. We will be reaching out to you in due course to assist in the transition, including, where not provided for in your current contract, updated terms and conditions. You are encouraged to review these updated terms and conditions and seek any clarification you need from our Bank representative or your Relationship Manager.
The transition to a RFR could lead to changes to your loan repayment, which impacts the calculation methodology of the loan repayment amount, besides this, it will also depend on market conditions at that point in time.
Yes, all SOR/LIBOR-pegged loans will be affected once SOR/LIBOR is discontinued. We will be reaching out to you in due course to assist in the transition, including, where not provided for in your current contract, updated terms and conditions. You are encouraged to review these updated terms and conditions and seek any clarification you need from our Bank representative or your Relationship Manager.
If you had hedged your SOR/LIBOR loan with an interest rate swap under ISDA, your interest rate swap would also have been likely pegged to SOR/LIBOR. You should review the terms of your interest rate swap contract as early as possible to understand the consequential implications once SOR/LIBOR is discontinued. There could be a hedging mismatch as the ISDA protocol for the replacement of SOR/LIBOR may not be in alignment with your loan. We will be reaching out to you to assist in the transition, including, where not provided for in your current contract, updated terms and conditions. You are encouraged to review these updated terms and conditions and seek any clarification you need from our Bank representative or your Relationship Manager.
You need to consult your tax adviser to advise you on the implications of the change in the benchmark once the Steering Committee Sub-group that was formed to provide guidance on accounting and tax-related issues, including hedge accounting, have published their guidance in due course.
If you wish to take up a new loan that references SOR/LIBOR, you should review the proposed new loan contract for terms that set out, or permit a switch or fallback to an alternative rate from SOR/LIBOR.
If you are keen to take up a new loan pegged to SORA, kindly contact your assigned Relationship Manager.
There are a few ways SORA could be used to calculate interest payments for corporate loans.
In other markets such as the US and the UK, banks have used the RFR rates calculated based on a compounded or simple average of the alternative overnight interest rate benchmark. Further update will be provided once the Singapore Steering Committee for SOR Transition to SORA (SC-STS) have issued their guidance on the matter.
The expected discontinuation of SOR only affects contracts that reference SOR, e.g. SOR floating rate loans. RHB will continue to offer other types of loans that fit customer needs, including fixed rate loans.
Reference:
SORA - Singapore Overnight Rate Average
SOR – Singapore Swap Offer Rate
LIBOR – London Inter-Bank Offered Rate
SIBOR TRANSITION TO SORA
FAQs FOR CONSUMERS
SORA has replaced the Singapore Interbank Offered Rate (SIBOR) and Swap Offer Rate (SOR) as the key interest rate benchmark for Singapore dollar (S$) interest rate contracts.
SORA is calculated and administered by the Monetary Authority of Singapore (MAS). It is published as a daily rate and a series of 1-month, 3-month and 6-month compounded rates on the MAS website at https://eservices.mas.gov.sg/statistics/dir/DomesticInterestRates.aspx. The Compounded SORA rates are calculated as the compounded average of daily SORA readings over the relevant 1-month, 3-months or 6-months periods before each publication date, reducing the effects of rate volatility.
SORA is a robust and transparent benchmark anchored on actual market transactions and underpinned by a deep and liquid overnight interbank funding market. It is determined based on the volume-weighted average rate of borrowing transactions in the unsecured overnight interbank Singapore dollar cash market in Singapore between 8.00am and 6.15pm.
As SIBOR will be discontinued after 31 December 2024, you are strongly encouraged to contact your bank early to explore available options:
If you do not switch out your SIBOR-based property loan to an alternative loan package by 30 April 2024, your bank will automatically convert it to the SCP at the historical median spread in June 2024, 6 months ahead of SIBOR discontinuation (i.e. Option 3). This is to allow time for an orderly transition out of SIBOR loans by banks and customers, and to ensure that all outstanding SIBOR loans are converted before SIBOR is discontinued.
Banks are offering customers with existing SIBOR loans a switch to the SORA Conversion Package at no additional fees and no additional lock-in period.
The SCP seeks to directly convert your existing SIBOR-based loan to a SORA-based loan. The key components of the SCP are:
Diagram 1: Illustration of SORA Conversion Package (SCP)
You should note that there are differences in the computation of the Adjustment Spread, depending on the timing of your transition.
The interest payment on your loan will be calculated based on:
3-month Compounded SORA + Your existing SIBOR loan margin + Adjustment Spread (spot-spread)
where the Adjustment Spread (spot-spread) is computed as the average difference between the applicable SIBOR and 3-month Compounded SORA in the preceding three-month period.[1] The Adjustment Spread (spot-spread) is floored at zero.
The Adjustment Spread (spot-spread) is published by ABS Benchmarks Administration Co (“ABS Co”) on the first business day of each month[2], and will apply for customers transitioning to the SCP in that particular month. E.g. the spot-spread published on 1 December 2023 will be used for customers who actively transition to the SCP in December 2023. After the transition, the adjustment spread remains fixed in your loan, for the remaining tenure of the loan.
The interest payment on your loan will be calculated based on:
3-month Compounded SORA + Your existing SIBOR loan margin + Adjustment Spread (historical median)
where the Adjustment Spread (historical median) is computed as the historical median between the applicable SIBOR and 3-month Compounded SORA over the period 30 June 2018 to 30 June 2023.
|
1-month SIBOR to 3-month compounded SORA |
3-month SIBOR to 3-month compounded SORA |
Adjustment Spread (4 decimal places) |
0.2426% |
0.3571% |
An adjustment spread is necessary when converting a SIBOR loan to a 3-month Compounded SORA reference because of inherent differences between SIBOR and compounded SORA. The adjustment spread accounts for differences in the level of SIBOR and 3-month Compounded SORA, to maintain parity when switching from SIBOR to 3-month Compounded SORA.
SIBOR represents unsecured term (1-month or 3-month) lending rates, and hence includes term and credit risk premiums, which account for the uncertainty in the level of interest rates over a future period as well as the risk of providing unsecured credit over a 1-month or 3-month period. In contrast, SORA and Compounded SORA represent overnight lending rates, and exclude such term and credit risks.
Consequently, as reflected in Diagram 2 below, 3-month Compounded SORA has also typically been significantly lower than 1-month and 3-month SIBOR.
Diagram 2: Historical comparison of 1-month SIBOR, 3-month SIBOR and 3-month Compounded SORA
The Steering Committee for SOR & SIBOR Transition (“SC-STS”) has recommended for the SCP to apply the spot-spread approach (floored at zero) during the period of active transition, and the 5-year historical median at automatic conversion. This approach has the following benefits:
Given these benefits, the approach of offering customers three options for transitioning of SIBOR retail loans was also supported by respondents to the SC-STS consultation on adjustment spreads for the conversion of legacy SIBOR loans to SORA[3].
The 5-year historical median spread – rather than the spot spread – is used for the automatic conversion of SIBOR loans, as this can be determined beforehand, providing customers with early certainty on the terms of automatic conversion that will apply to their loan should they do nothing and be converted in June 2024.
The 5-year historical median spread is a fair estimate of the average spread between SIBOR and Compounded SORA as a 5-year period is sufficiently long to smooth out the effects of idiosyncratic market events over past years, and reasonably estimates where spreads could converge towards in the long run. The use of a 5-year historical median spread is also aligned to international convention adopted for the transition of similar interest rate contracts, as well as the transition of SIBOR and SOR wholesale contracts, and was supported by respondents to the SC-STS consultation on adjustment spreads for the conversion of legacy SIBOR loans to SORA.
The Adjustment Spread that is applied by your bank in its SORA Conversion Package, as would be stated in the contract agreement, will stay the same for the remaining tenure of your loan. There will not be any change, even though the Adjustment Spread (spot spread) published by the ABS Co in subsequent months may move higher or lower due to fluctuations that are inherent in floating interest rates.
You can refer to the ABS Co’s website for the prevailing Adjustment Spread (spot spread) that will be applied in the SORA Conversion Package at the point when you switch your loan.
If you have converted to the SORA Conversion Package at an adjustment spread (spot-spread) of 0.3012%:
Current SIBOR Package |
SORA Conversion Package |
Year 2023: 3-month SIBOR + 1.00% |
Year 2023: 3-month compounded SORA + 1.00% + 0.3012% |
Year 2024: 3-month SIBOR + 1.20% |
Year 2024: 3-month compounded SORA + 1.20% + 0.3012% |
Year 2025 onwards: 3-month SIBOR + 1.50% |
Year 2025 onwards: 3-month compounded SORA + 1.50% + 0.3012% |
Your loan will remain on fixed rate until the fixed tenure ends. You may decide if you would like to switch to a prevailing property loan package offered by your bank or to switch the floating part of your loan (e.g. loan might reference SIBOR in the fourth year, after the fixed rate period ends) to the SORA Conversion Package.
If you decide to switch to a prevailing property loan package offered by your bank, no administrative or prepayment fee will be charged for the conversion, but a lock-in period may apply depending on the package you choose.
If you decide to switch to the SORA Conversion Package and:
There is no “best package”, as the financing needs and preferences would differ across customers. As such, we encourage you to contact your bank early to discuss your options.
As a general guide, you may wish to consider some of these factors (non-exhaustive):
|
1-month SIBOR to 3-month Compounded SORA |
3-month SIBOR to 3-month Compounded SORA |
Applied in June 2024 |
0.2426% |
0.3571% |
|
1-month SIBOR to 3-month Compounded SORA |
3-month SIBOR to 3-month Compounded SORA |
1 September 2023 |
[To be published by ABS Co] |
[To be published by ABS Co] |
1 November 2023 |
[To be published by ABS Co] |
[To be published by ABS Co] |
1 December 2023 |
[To be published by ABS Co] |
[To be published by ABS Co] |
2 January 2024 |
[To be published by ABS Co] |
[To be published by ABS Co] |
1 February 2024 |
[To be published by ABS Co] |
[To be published by ABS Co] |
1 March 2024 |
[To be published by ABS Co] |
[To be published by ABS Co] |
1 April 2024 |
[To be published by ABS Co] |
[To be published by ABS Co] |
We encourage you to speak to your bank early, who will be able to provide further advice on your options.
Please call your bank or contact your relationship manager.
There are no fees for switching out of your SIBOR-based loan to the SCP or any prevailing packages offered by your bank. However, fees will apply according to the terms of your existing loan package should you decide to refinance your loan with another financial institution.
For specific scenarios, please see further details below.
Scenario |
Fees that may apply |
Your loan is out of lock-in period and not bound by any subsidies (such as legal or valuation subsidies).
|
One-time fee-free switch to prevailing packages or SCP is provided. |
Your loan is still within subsidies clawback period e.g. within 3 years from date of loan disbursement |
One-time fee-free switch to prevailing packages or SCP is provided.
You need not repay the subsidies received under your current loan when switching to any prevailing packages or SCP. However, the clawback period of your subsidies will be carried through to your re-priced loan. If you decide to redeem your loan, the clawback of all subsidies will apply.
If the prevailing loan package comes with a separate clawback period (e.g. 3 years), this will run concurrently with the clawback period that was ported over from the SIBOR loan (e.g. 1 year).
Please note that the clawback period is independent from the lock-in period of the new loan, i.e. they do not impact each other. |
Your loan is still within lock-in period subject to redemption fees e.g. within 3 years from date of loan disbursement |
One-time fee-free switch to prevailing packages or SCP is provided.
There will be no prepayment fees charged by switching to any prevailing packages or SCP. However, if you decide to redeem your loan, the prepayment fees will apply.
There will be no change to the remaining period of your lock-in if you decide to switch to the SCP. However, if you decide to switch to a prevailing loan package which comes with a fresh lock-in period (e.g. 3 years), you will be subject to this fresh lock-in period, even if you are still within the lock-in period of your SIBOR loan package. For example, if you have 1 year remaining lock-in period on the SIBOR loan package and the lock-in period of the prevailing loan package is 2 years, the new lock-in period of 2 years would apply.
Please note that the lock-in period is independent from the clawback period of the new loan, i.e. they do not impact each other.
|
Your loan is still undisbursed/partially disbursed. |
One-time fee-free switch to prevailing packages or SCP is provided.
There will be no prepayment or cancellation fees charged for this switch. However, the fees will apply if you decide to redeem your loan.
There will be no change to the remaining period of your lock-in if you decide to switch to the SCP. However, if you decide to switch to a prevailing loan package which comes with a fresh lock-in period (e.g. 3 years), you will be subject to this fresh lock-in period, even if you are still within the lock-in period of your SIBOR loan package. For example, if you have 1 year remaining lock-in period on the SIBOR loan package and the lock-in period of the prevailing loan package is 2 years, the new lock-in period of 2 years would apply.
|
Your loan is currently on fixed rate and will only be changing to a SIBOR reference rate after the fixed tenure ends. |
One-time fee-free switch to prevailing packages or SCP is provided.
There will be no prepayment fees charged by switching to any prevailing packages or SCP. However, if you decide to redeem your loan, the prepayment fees will apply.
There will be no change to the remaining period of your lock-in if you decide to switch to the SCP and the SCP will apply after the end of your fixed rate tenure on the SIBOR-based part of your loan.
For example, if you have 1-year remaining lock-in period on fixed rate:
However, if you decide to switch to a prevailing loan package which comes with a fresh lock-in period (e.g. 3 years), you will be subject to this fresh lock-in period, even if you are still within the lock-in period of your existing loan package.
For example, if you have 1-year remaining lock-in period on the existing loan package and the lock-in period of the prevailing loan package is 2 years, the new lock-in period of 2 years would apply.
|
For the switch to the prevailing package, you may be subject to the terms and conditions of your bank’s prevailing package, including a fresh lock-in period.
As the need to replace the SIBOR-based property loan with an alternative loan package is necessitated by the discontinuation of SIBOR on 31 December 2024, MAS will not require financial institutions to re-compute the TDSR, LTV, and MSR requirements for affected customers, including investment property loan borrowers, making the switch with the same financial institution. This is a one-time exception as part of the industry-wide exercise to facilitate customers’ switch to alternative loan packages offered by the same bank, and extends to customers utilising the one-time fee-free switch from the SCP to the prevailing package.
If you initiate a refinancing of your property loan with another financial institution, you will be subject to the prevailing property loan rules (e.g. TDSR, LTV, and MSR). However, you should check with that financial institution if you are eligible for any of the existing exemptions that are provided. For example, currently, borrowers are exempted from TDSR when refinancing their owner-occupied housing loans.
For request(s) other than the switching out of your SIBOR-based loan to a prevailing loan package, you would be subject to credit assessment and thus, the re-computation of TDSR shall apply. You are recommended to speak with your bank if you have requests beyond package switching.
[1] For example, if your existing loan reference is 1-month SIBOR, the Adjustment Spread (spot-spread) is the average difference between 1-month SIBOR and 3-month compounded SORA in the preceding three-month period.
[2] https://abs.org.sg/benchmark-rates/publications
[3] See SC-STS Response to Consultation Feedback and Final Recommendations for Adjustment Spread for the Conversion of SIBOR Loans to SORA (30 June 2023) at http://abs.org.sg/docs/library/response-to-feedback-on-consultation-on-adjustment-spreads-for-the-conversion-of-legacy-sibor-loans-to-sora.pdf
Be it paying for an overseas purchase or sending money to a studying child, Telegraphic Transfer is the perfect tool to send foreign currency overseas in a timely and secure manner. The benefits of TT are:
On Demand rates are applied when purchasing or selling of demand draft, foreign cheque and etc. It is a cheaper method for payments made overseas and funds are cleared through our correspondents in major cities around the world.
Private Property Board Codes
Reference Rate |
Current Interest Rate ( % p.a. ) |
MR1 |
6.25 |
MR2 |
6.45 |
MR3 |
5.50 |
MR4 |
5.50 |
MR5 |
6.35 |
MR6 |
5.75 |
MR7 |
5.70 |
HP1 |
6.65 |
MRR |
5.75 |
MVR |
6.25 |
HDB Board Codes
Reference Rate |
Current Interest Rate ( % p.a. ) |
HB1 |
4.75 |
HB2 |
4.25 |
HB3 |
3.50 |
HB4 |
4.00 |
HB5 |
4.75 |
HH1 |
6.35 |
HBD |
4.75 |
HB6 |
4.25 |
Commercial Board Codes
Reference Rate |
Current Interest Rate ( % p.a. ) |
CR1 |
4.68 |
CR2 |
5.18 |
CR3 |
5.68 |
CR6 |
6.58 |
CR7 |
5.60 |
HC1 |
7.65 |
CRR |
5.20 |
Malaysia Property Board Codes
Reference Rate |
Current Interest Rate ( % p.a. ) |
MBR |
7.00 |
Premium Financing Overdraft |
Board Rate ( % p.a. ) |
SGD |
4.20 |
USD |
5.60 |
Overdraft is currently not available for new applicants.
Premium Financing Term Loan |
Board Rate ( % p.a. ) |
SGD |
4.20 |
Please note that both Overdraft and Term Loan board rates will be adjusted to the aforementioned with effect from 1 Aug 2023.
The London Interbank Offered Rate (LIBOR), which serves as an interest rate benchmark across a number of financial products, is expected to be discontinued by the end of 2021. LIBOR (in all its underlying currencies) is expected to be replaced with overnight risk-free rates (RFRs).
The transition from LIBOR to RFRs arises from the global shift to improve the robustness and integrity of financial benchmarks. As part of this shift, the UK Financial Conduct Authority, which acts as the supervisory authority for LIBOR, stated that it would no longer compel banks to submit rates used for the calculation of LIBOR after 31 December 2021.
Alternative benchmark rates have been identified by the respective jurisdictions/countries to replace LIBORs and are set out in the table below. These risk free rates are all overnight interest rate benchmarks, and are based on actual transactions which may be secured or unsecured.
LIBOR reform currencies |
Other RFR reform currencies |
||||||
USD |
EUR |
GBP |
JPY |
CHF |
SGD |
THB |
|
Legacy benchmark to discontinue |
USD LIBOR |
EUR LIBOR |
GBP LIBOR |
JPY LIBOR |
CHF LIBOR |
Singapore Swap Offer Rate (SOR) |
Thai Baht Interest Rate Fixing (THBFIX) |
Proposed alternative RFR |
Secured Overnight Financing Rate (SOFR) |
Euro short-term rate (€STR) |
Sterling Overnight Index Average (SONIA) |
Tokyo Overnight Average Rate (TONA) |
Swiss Average Rate Overnight (SARON) |
Singapore Overnight Rate Average (SORA) |
Thailand Overnight Repurchase Rate (THOR) |
Administrator of RFR |
Federal Reserve of New York |
European Central Bank |
Bank of England |
Bank of Japan |
SIX Swiss Exchange |
Monetary Authority of Singapore (MAS) |
Bank of Thailand (BOT) |
As the Singapore Dollar Swap Offer Rate (SOR) utilises USD LIBOR in its computation, the expected discontinuation of LIBOR by end-2021 would impact the sustainability of SOR. The Association of Banks in Singapore and the Singapore Foreign Exchange Market Committee (ABS-SFEMC) has identified the Singapore Overnight Rate Average (SORA) as the most suitable interest rate benchmark to replace SOR. SORA has been published by the Monetary Authority of Singapore since 2005.
Should our customers have loan(s) or derivatives contracts with us that reference LIBOR or SOR maturing after December 2021, this transition will impact them. This will require them transiting the LIBOR or SOR reference rate to the relevant RFRs of either SOFR for USDLIBOR or SORA for SGDSOR.
Our Bank’s representative or Relationship Manager will contact customers to assist customers with this transition, taking into account the industry’s guidance.
Customers may refer to the following websites to understand the current global reform, as well as the frequently asked questions on MAS and ABS’s websites for more information on the transition of SOR to SORA.
Monetary Authority of Singapore’s website on Interest Rate Benchmark Transitions:
https://www.mas.gov.sg/regulation/interest-rate-benchmarks-transition
UK Financial Conduct Authority’s website on transition from LIBOR:
The International Organisation of Securities Commissions’s website on a general background regarding benchmarks transition from LIBOR
The Association of Banks in Singapore’s (ABS) website on SOR to SORA transition:
https://abs.org.sg/benchmark-rates/sor-to-sora
https://www.iosco.org/library/pubdocs/pdf/IOSCOPD636.pdf
The Steering Committee for SOR & SIBOR Transition to SORA (SC-STS) and MAS have announced the following new industry timelines:
There is no immediate impact on your loan at this juncture. We will be reaching out to you in due course to assist with the transition. However, to prepare for the upcoming transition, you are encouraged to review the terms and conditions of your loan contract to understand the implications and the actions required.
We will be sending an official letter at the appropriate time for you to consider different options. You will also need to consider if replacing a SOR loan with other benchmarks impacts your related transactions (e.g. hedges) and the corresponding accounting and tax implications.
SORA and SIBOR are different SGD benchmarks that are determined on a different basis. In relation to the usage of SIBOR, ABS Benchmarks Administration Pte Ltd (ABS Co) is conducting a transitional testing for the enhanced SIBOR, and will provide an update after the transitional testing is completed in 2H 2020. The results of the transitional testing will be considered by the Steering Committee for SOR Transition to SORA (SC-STS), which will issue industry guidance in due course.
While SORA is not commonly used in the loan market, it is not new and has been published daily by the MAS since 2005. Over time, just like any new benchmark, e.g., when SOR was introduced, borrowers will become familiar with SORA, and its use in loans and other cash or derivatives products will increase.
When SOR/LIBOR is discontinued, we will no longer be able to calculate your interest payment using SOR. Instead, your loan interest payment will be calculated using a ‘fallback’ rate or other alternative provisions specified in the terms and conditions of your loan contract. You should start preparing for the transition as early as possible by reviewing the terms and conditions of your loan contract to understand the consequential implications and actions required. We will be reaching out to you in due course to assist in the transition, including, where not provided for in your current contract, updated terms and conditions. You are encouraged to review these updated terms and conditions and seek any clarification you need from our Bank representative or your Relationship Manager.
The transition to a RFR could lead to changes to your loan repayment, which impacts the calculation methodology of the loan repayment amount, besides this, it will also depend on market conditions at that point in time.
Yes, all SOR/LIBOR-pegged loans will be affected once SOR/LIBOR is discontinued. We will be reaching out to you in due course to assist in the transition, including, where not provided for in your current contract, updated terms and conditions. You are encouraged to review these updated terms and conditions and seek any clarification you need from our Bank representative or your Relationship Manager.
If you had hedged your SOR/LIBOR loan with an interest rate swap under ISDA, your interest rate swap would also have been likely pegged to SOR/LIBOR. You should review the terms of your interest rate swap contract as early as possible to understand the consequential implications once SOR/LIBOR is discontinued. There could be a hedging mismatch as the ISDA protocol for the replacement of SOR/LIBOR may not be in alignment with your loan. We will be reaching out to you to assist in the transition, including, where not provided for in your current contract, updated terms and conditions. You are encouraged to review these updated terms and conditions and seek any clarification you need from our Bank representative or your Relationship Manager.
You need to consult your tax adviser to advise you on the implications of the change in the benchmark once the Steering Committee Sub-group that was formed to provide guidance on accounting and tax-related issues, including hedge accounting, have published their guidance in due course.
If you wish to take up a new loan that references SOR/LIBOR, you should review the proposed new loan contract for terms that set out, or permit a switch or fallback to an alternative rate from SOR/LIBOR.
If you are keen to take up a new loan pegged to SORA, kindly contact your assigned Relationship Manager.
There are a few ways SORA could be used to calculate interest payments for corporate loans.
In other markets such as the US and the UK, banks have used the RFR rates calculated based on a compounded or simple average of the alternative overnight interest rate benchmark. Further update will be provided once the Singapore Steering Committee for SOR Transition to SORA (SC-STS) have issued their guidance on the matter.
The expected discontinuation of SOR only affects contracts that reference SOR, e.g. SOR floating rate loans. RHB will continue to offer other types of loans that fit customer needs, including fixed rate loans.
Reference:
SORA - Singapore Overnight Rate Average
SOR – Singapore Swap Offer Rate
LIBOR – London Inter-Bank Offered Rate
SIBOR TRANSITION TO SORA
FAQs FOR CONSUMERS
SORA has replaced the Singapore Interbank Offered Rate (SIBOR) and Swap Offer Rate (SOR) as the key interest rate benchmark for Singapore dollar (S$) interest rate contracts.
SORA is calculated and administered by the Monetary Authority of Singapore (MAS). It is published as a daily rate and a series of 1-month, 3-month and 6-month compounded rates on the MAS website at https://eservices.mas.gov.sg/statistics/dir/DomesticInterestRates.aspx. The Compounded SORA rates are calculated as the compounded average of daily SORA readings over the relevant 1-month, 3-months or 6-months periods before each publication date, reducing the effects of rate volatility.
SORA is a robust and transparent benchmark anchored on actual market transactions and underpinned by a deep and liquid overnight interbank funding market. It is determined based on the volume-weighted average rate of borrowing transactions in the unsecured overnight interbank Singapore dollar cash market in Singapore between 8.00am and 6.15pm.
As SIBOR will be discontinued after 31 December 2024, you are strongly encouraged to contact your bank early to explore available options:
If you do not switch out your SIBOR-based property loan to an alternative loan package by 30 April 2024, your bank will automatically convert it to the SCP at the historical median spread in June 2024, 6 months ahead of SIBOR discontinuation (i.e. Option 3). This is to allow time for an orderly transition out of SIBOR loans by banks and customers, and to ensure that all outstanding SIBOR loans are converted before SIBOR is discontinued.
Banks are offering customers with existing SIBOR loans a switch to the SORA Conversion Package at no additional fees and no additional lock-in period.
The SCP seeks to directly convert your existing SIBOR-based loan to a SORA-based loan. The key components of the SCP are:
Diagram 1: Illustration of SORA Conversion Package (SCP)
You should note that there are differences in the computation of the Adjustment Spread, depending on the timing of your transition.
The interest payment on your loan will be calculated based on:
3-month Compounded SORA + Your existing SIBOR loan margin + Adjustment Spread (spot-spread)
where the Adjustment Spread (spot-spread) is computed as the average difference between the applicable SIBOR and 3-month Compounded SORA in the preceding three-month period.[1] The Adjustment Spread (spot-spread) is floored at zero.
The Adjustment Spread (spot-spread) is published by ABS Benchmarks Administration Co (“ABS Co”) on the first business day of each month[2], and will apply for customers transitioning to the SCP in that particular month. E.g. the spot-spread published on 1 December 2023 will be used for customers who actively transition to the SCP in December 2023. After the transition, the adjustment spread remains fixed in your loan, for the remaining tenure of the loan.
The interest payment on your loan will be calculated based on:
3-month Compounded SORA + Your existing SIBOR loan margin + Adjustment Spread (historical median)
where the Adjustment Spread (historical median) is computed as the historical median between the applicable SIBOR and 3-month Compounded SORA over the period 30 June 2018 to 30 June 2023.
|
1-month SIBOR to 3-month compounded SORA |
3-month SIBOR to 3-month compounded SORA |
Adjustment Spread (4 decimal places) |
0.2426% |
0.3571% |
An adjustment spread is necessary when converting a SIBOR loan to a 3-month Compounded SORA reference because of inherent differences between SIBOR and compounded SORA. The adjustment spread accounts for differences in the level of SIBOR and 3-month Compounded SORA, to maintain parity when switching from SIBOR to 3-month Compounded SORA.
SIBOR represents unsecured term (1-month or 3-month) lending rates, and hence includes term and credit risk premiums, which account for the uncertainty in the level of interest rates over a future period as well as the risk of providing unsecured credit over a 1-month or 3-month period. In contrast, SORA and Compounded SORA represent overnight lending rates, and exclude such term and credit risks.
Consequently, as reflected in Diagram 2 below, 3-month Compounded SORA has also typically been significantly lower than 1-month and 3-month SIBOR.
Diagram 2: Historical comparison of 1-month SIBOR, 3-month SIBOR and 3-month Compounded SORA
The Steering Committee for SOR & SIBOR Transition (“SC-STS”) has recommended for the SCP to apply the spot-spread approach (floored at zero) during the period of active transition, and the 5-year historical median at automatic conversion. This approach has the following benefits:
Given these benefits, the approach of offering customers three options for transitioning of SIBOR retail loans was also supported by respondents to the SC-STS consultation on adjustment spreads for the conversion of legacy SIBOR loans to SORA[3].
The 5-year historical median spread – rather than the spot spread – is used for the automatic conversion of SIBOR loans, as this can be determined beforehand, providing customers with early certainty on the terms of automatic conversion that will apply to their loan should they do nothing and be converted in June 2024.
The 5-year historical median spread is a fair estimate of the average spread between SIBOR and Compounded SORA as a 5-year period is sufficiently long to smooth out the effects of idiosyncratic market events over past years, and reasonably estimates where spreads could converge towards in the long run. The use of a 5-year historical median spread is also aligned to international convention adopted for the transition of similar interest rate contracts, as well as the transition of SIBOR and SOR wholesale contracts, and was supported by respondents to the SC-STS consultation on adjustment spreads for the conversion of legacy SIBOR loans to SORA.
The Adjustment Spread that is applied by your bank in its SORA Conversion Package, as would be stated in the contract agreement, will stay the same for the remaining tenure of your loan. There will not be any change, even though the Adjustment Spread (spot spread) published by the ABS Co in subsequent months may move higher or lower due to fluctuations that are inherent in floating interest rates.
You can refer to the ABS Co’s website for the prevailing Adjustment Spread (spot spread) that will be applied in the SORA Conversion Package at the point when you switch your loan.
If you have converted to the SORA Conversion Package at an adjustment spread (spot-spread) of 0.3012%:
Current SIBOR Package |
SORA Conversion Package |
Year 2023: 3-month SIBOR + 1.00% |
Year 2023: 3-month compounded SORA + 1.00% + 0.3012% |
Year 2024: 3-month SIBOR + 1.20% |
Year 2024: 3-month compounded SORA + 1.20% + 0.3012% |
Year 2025 onwards: 3-month SIBOR + 1.50% |
Year 2025 onwards: 3-month compounded SORA + 1.50% + 0.3012% |
Your loan will remain on fixed rate until the fixed tenure ends. You may decide if you would like to switch to a prevailing property loan package offered by your bank or to switch the floating part of your loan (e.g. loan might reference SIBOR in the fourth year, after the fixed rate period ends) to the SORA Conversion Package.
If you decide to switch to a prevailing property loan package offered by your bank, no administrative or prepayment fee will be charged for the conversion, but a lock-in period may apply depending on the package you choose.
If you decide to switch to the SORA Conversion Package and:
There is no “best package”, as the financing needs and preferences would differ across customers. As such, we encourage you to contact your bank early to discuss your options.
As a general guide, you may wish to consider some of these factors (non-exhaustive):
|
1-month SIBOR to 3-month Compounded SORA |
3-month SIBOR to 3-month Compounded SORA |
Applied in June 2024 |
0.2426% |
0.3571% |
|
1-month SIBOR to 3-month Compounded SORA |
3-month SIBOR to 3-month Compounded SORA |
1 September 2023 |
[To be published by ABS Co] |
[To be published by ABS Co] |
1 November 2023 |
[To be published by ABS Co] |
[To be published by ABS Co] |
1 December 2023 |
[To be published by ABS Co] |
[To be published by ABS Co] |
2 January 2024 |
[To be published by ABS Co] |
[To be published by ABS Co] |
1 February 2024 |
[To be published by ABS Co] |
[To be published by ABS Co] |
1 March 2024 |
[To be published by ABS Co] |
[To be published by ABS Co] |
1 April 2024 |
[To be published by ABS Co] |
[To be published by ABS Co] |
We encourage you to speak to your bank early, who will be able to provide further advice on your options.
Please call your bank or contact your relationship manager.
There are no fees for switching out of your SIBOR-based loan to the SCP or any prevailing packages offered by your bank. However, fees will apply according to the terms of your existing loan package should you decide to refinance your loan with another financial institution.
For specific scenarios, please see further details below.
Scenario |
Fees that may apply |
Your loan is out of lock-in period and not bound by any subsidies (such as legal or valuation subsidies).
|
One-time fee-free switch to prevailing packages or SCP is provided. |
Your loan is still within subsidies clawback period e.g. within 3 years from date of loan disbursement |
One-time fee-free switch to prevailing packages or SCP is provided.
You need not repay the subsidies received under your current loan when switching to any prevailing packages or SCP. However, the clawback period of your subsidies will be carried through to your re-priced loan. If you decide to redeem your loan, the clawback of all subsidies will apply.
If the prevailing loan package comes with a separate clawback period (e.g. 3 years), this will run concurrently with the clawback period that was ported over from the SIBOR loan (e.g. 1 year).
Please note that the clawback period is independent from the lock-in period of the new loan, i.e. they do not impact each other. |
Your loan is still within lock-in period subject to redemption fees e.g. within 3 years from date of loan disbursement |
One-time fee-free switch to prevailing packages or SCP is provided.
There will be no prepayment fees charged by switching to any prevailing packages or SCP. However, if you decide to redeem your loan, the prepayment fees will apply.
There will be no change to the remaining period of your lock-in if you decide to switch to the SCP. However, if you decide to switch to a prevailing loan package which comes with a fresh lock-in period (e.g. 3 years), you will be subject to this fresh lock-in period, even if you are still within the lock-in period of your SIBOR loan package. For example, if you have 1 year remaining lock-in period on the SIBOR loan package and the lock-in period of the prevailing loan package is 2 years, the new lock-in period of 2 years would apply.
Please note that the lock-in period is independent from the clawback period of the new loan, i.e. they do not impact each other.
|
Your loan is still undisbursed/partially disbursed. |
One-time fee-free switch to prevailing packages or SCP is provided.
There will be no prepayment or cancellation fees charged for this switch. However, the fees will apply if you decide to redeem your loan.
There will be no change to the remaining period of your lock-in if you decide to switch to the SCP. However, if you decide to switch to a prevailing loan package which comes with a fresh lock-in period (e.g. 3 years), you will be subject to this fresh lock-in period, even if you are still within the lock-in period of your SIBOR loan package. For example, if you have 1 year remaining lock-in period on the SIBOR loan package and the lock-in period of the prevailing loan package is 2 years, the new lock-in period of 2 years would apply.
|
Your loan is currently on fixed rate and will only be changing to a SIBOR reference rate after the fixed tenure ends. |
One-time fee-free switch to prevailing packages or SCP is provided.
There will be no prepayment fees charged by switching to any prevailing packages or SCP. However, if you decide to redeem your loan, the prepayment fees will apply.
There will be no change to the remaining period of your lock-in if you decide to switch to the SCP and the SCP will apply after the end of your fixed rate tenure on the SIBOR-based part of your loan.
For example, if you have 1-year remaining lock-in period on fixed rate:
However, if you decide to switch to a prevailing loan package which comes with a fresh lock-in period (e.g. 3 years), you will be subject to this fresh lock-in period, even if you are still within the lock-in period of your existing loan package.
For example, if you have 1-year remaining lock-in period on the existing loan package and the lock-in period of the prevailing loan package is 2 years, the new lock-in period of 2 years would apply.
|
For the switch to the prevailing package, you may be subject to the terms and conditions of your bank’s prevailing package, including a fresh lock-in period.
As the need to replace the SIBOR-based property loan with an alternative loan package is necessitated by the discontinuation of SIBOR on 31 December 2024, MAS will not require financial institutions to re-compute the TDSR, LTV, and MSR requirements for affected customers, including investment property loan borrowers, making the switch with the same financial institution. This is a one-time exception as part of the industry-wide exercise to facilitate customers’ switch to alternative loan packages offered by the same bank, and extends to customers utilising the one-time fee-free switch from the SCP to the prevailing package.
If you initiate a refinancing of your property loan with another financial institution, you will be subject to the prevailing property loan rules (e.g. TDSR, LTV, and MSR). However, you should check with that financial institution if you are eligible for any of the existing exemptions that are provided. For example, currently, borrowers are exempted from TDSR when refinancing their owner-occupied housing loans.
For request(s) other than the switching out of your SIBOR-based loan to a prevailing loan package, you would be subject to credit assessment and thus, the re-computation of TDSR shall apply. You are recommended to speak with your bank if you have requests beyond package switching.
[1] For example, if your existing loan reference is 1-month SIBOR, the Adjustment Spread (spot-spread) is the average difference between 1-month SIBOR and 3-month compounded SORA in the preceding three-month period.
[2] https://abs.org.sg/benchmark-rates/publications
[3] See SC-STS Response to Consultation Feedback and Final Recommendations for Adjustment Spread for the Conversion of SIBOR Loans to SORA (30 June 2023) at http://abs.org.sg/docs/library/response-to-feedback-on-consultation-on-adjustment-spreads-for-the-conversion-of-legacy-sibor-loans-to-sora.pdf
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