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Important Information

SOR transition to SORA – FAQ for Retail Clients

On 19 March 2020, the Steering Committee for SOR Transition to SORA (“SC-STS”) outlined its key priorities and updated transition roadmap to achieve a smooth transition to the Singapore Overnight Rate Average (“SORA”) as the new interest rate benchmark for the SGD cash and derivatives markets. This was set out together with its response to feedback received on the consultation report “Roadmap for Transition of Interest Rate Benchmarks: From SOR to SORA”, which was released by the Association of Banks and Singapore Foreign Exchange Markets Committee (“ABS-SFEMC”) on 30 August 2019. The transition will affect retail clients who hold products which reference SOR.

Q1. I currently have a property loan referencing SOR. How does the discontinuation of SOR affect my property loan? Do I have to take any action now?

If you have a property loan that references SOR, your bank will contact you at the appropriate time, giving you enough notice to consider switching to other loan packages which do not reference SOR, and guide you through the transition.  There is no immediate action required from you.           

Q2. When the transition happens, will I be subject to re-computation of the Total Debt Servicing Ratio (TDSR) to switch my property loan referencing SOR to another loan package?

As the offering of replacement property loan packages is a one-time industry wide exercise driven by the discontinuation of SOR, MAS will not require financial institutions to re-compute the TDSR for affected customers who switch to replacement loan packages.

Please note that under other refinancing scenarios (for example, should you initiate a refinancing at another financial institution), you may be subject to TDSR computation under the prevailing refinancing rules. 

Q3. Can I choose not to replace my property loan referencing SOR? 

SOR utilises US LIBOR in its computation. As LIBOR is expected to be discontinued after the end of 2021, the discontinuation of LIBOR will directly affect the sustainability of SOR. As such, there will be a need to replace your property loan referencing SOR before the end of 2021.

 Q4. Would my other retail loans be affected by this transition? 

If you have other retail loans referencing SOR, the loans will similarly be affected by this transition. There is no immediate action required from you unless you wish to reprice or restructure these loans before your bank contacts you to consider other loan packages which do not reference SOR.

Q5. What is the possibility of using SIBOR (or enhanced SIBOR) as a replacement rate for retail loans referencing SOR? 

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. 

Q6. I hold investment products which reference SOR. What action is required? 

The issuer of such investment products (including but not limited to floating rate notes, structured notes, etc) will notify you in due course of the actions that you may be required to take as part of the transition.  Please look out for notices from the issuer.

For more details regarding the SOR transition to SORA, you may refer to the ABS website at https://www.abs.org.sg/benchmark-rates/about-sc-sts