SINGAPORE - The Monetary Authority of Singapore will be stepping up supervisory engagement to ensure that banks in the Republic are well prepared to transition from Swap Offer Rate - a key interest rate benchmark - to the Singapore Overnight Rate Average by the end of 2021, said a top official.
SOR is used in pricing of bonds and loans to large institutions with hedging requirements, as it is also the reference benchmark in SGD derivatives. Focusing on achieving a smooth and well-coordinated transition is a key pillar, but the main challenge is how to encourage market participants to shift from a SOR-based market which is still deep and liquid, to the nascent but developing Sora-based market, she said.
Preparing early at the individual-firm level is another key pillar she listed for a smooth transition. This includes identifying risk exposures, putting in place appropriate contractual fallbacks, ensuring systems' readiness, understanding the features of new Sora products, and ultimately, transacting in these products, Ms Loh said.
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Source: BusinessTimes - 🏆 15. / 51 Read more »
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