IBOR transition in Asia-Pacific
As explained in the introduction to IBOR transition page, regulatory authorities and public and private sector working groups are discussing benchmark reforms in several jurisdictions, including in Asia-Pacific.
The content of this page reflects HSBC’s understanding, as at 21 July 2021, of the expected changes to contracts denominated in different currencies in Asia-Pacific. There still remains a high degree of uncertainty around IBOR transition. This overview is neither complete or exhaustive and does not constitute any form of advice or recommendation. Clients should contact their professional advisors on the possible implications of the changes such as financial, legal, accountancy or tax consequences.
We are actively monitoring developments and participating in a number of industry and regulatory working groups. HSBC will continue to provide more information on the changes, notably when there is more certainty on which new benchmarks are being adopted, their methodology, their term structure and the transition process agreed at industry level.
We will periodically update this page and provide communications relating to the changes. In the meantime, if you require any further information, please contact your usual Relationship Manager. HSBC may also provide you with product or service specific information which you should consider carefully.
The Australian Dollar BBSW (Bank Bill Swap Rate) replaced Australian Dollar LIBOR (AUD LIBOR) in 2013 and will continue alongside AONIA (Australian Overnight Index Average), the recommended near Risk-Free-Rate (RFR) for AUD also known as Reserve Bank of Australia Cash Rate (RBA Cash Rate).
The People’s Bank of China (PBOC) released a white paper on 31 August 2020, expressing its intention to adopt the Depository-Institutions Repo Rate (DR) as the alternative substitute rate in the Chinese banking market.
The Hong Kong Dollar HIBOR (Hong Kong Interbank Offered Rate) will continue alongside a new alternative RFR called Hong Kong Dollar Overnight Index Average (HONIA). More information on HONIA is available on the Hong Kong Monetary Authority (HKMA)’s website
USD LIBOR transition in Hong Kong
As per the US Federal Reserve Board (FRB) supervisory guidance issued in November 2020, market participants are encouraged to transition away from US Dollar LIBOR (USD LIBOR) as soon as practicable and not to enter into new transactions referencing USD LIBOR after 31 December 2021 unless they are used for market making or for existing LIBOR-based exposure hedging.
In December 2020, the ARRC confirmed that its recommended best practice to cease issuance of USD LIBOR based loans, derivatives and securitisations that expire post 2021 by 30 June 2021 was fully consistent with the timelines and message set out in the US supervisory guidance.
On 25 March 2021, the HKMA announced that, as a result of insufficient regional readiness, it was no longer appropriate to stick to its original 30 June 2021 target date for ceasing to issue new products based on LIBOR, including USD LIBOR. The HKMA nevertheless encouraged Financial Institutions, such as HSBC, to continue to press ahead with their transition preparations and to stop offering new LIBOR-based contracts by the end of 2021.
The calculation methodologies for the replacements of Indian Rupee MIFOR (Mumbai Interbank Forward Offer Rate) are being finalised by an industry working group. The current expectation is that the fallback (‘Adjusted’) as well as new (‘Modified’) MIFOR rates will start getting published by the Indian benchmark administrator before the end of 2021. Since it’s currently based on USD LIBOR, the current form of MIFOR is also demising after 30 June 2023.
As part of its 5 March 2021 announcement related to the cessation of LIBOR settings in Sterling, Euro, Swiss Franc, Japanese Yen and US Dollar, the Financial Conduct Authority (FCA), the UK regulator, stated that all Japanese Yen LIBOR (JPY LIBOR) settings will either cease or no longer be representative immediately after 31 December 2021. The FCA also announced a consultation on the publication of Synthetic JPY LIBOR, which could be utilised for run-off of legacy positions for a limited period, subject to conditions.
Although Tokyo Interbank Offered Rate (TIBOR) reforms implemented by the JBA TIBOR Administration (JBATA) should ensure that TIBOR can continue to be used, the Cross-Industry Committee on Japanese Yen Interest Rate Benchmarks is recommending the Tokyo Overnight Average rate (TONA) as the RFR alternative to JPY LIBOR, where appropriate.
Considering the developments in international financial benchmark initiatives, JBATA has started to discuss the integration of JPY TIBOR and Euroyen TIBOR, with the possibility of Euroyen TIBOR being discontinued.
In line with the Bank of Japan (BOJ)’s recommendations, clients and counterparties will no longer be able to sign new contracts based on JPY LIBOR with HSBC after 30 June 2021 for loans and after 30 September 2021 for interest rate swaps, unless they mature in 2021. We will propose TONA or other alternatives to JPY LIBOR where available and subject to eligibility criteria. More information on TONA is available on the BOJ’s website.
Currently, there is no cessation timeline for the Korean Won CD (Certificate of Deposit). However, the local industry working group is discussing further details of the alternative KRW Repo Rate.
Currently, there is no cessation timeline for the Malaysian Ringgit (MYR) KLIBOR (Kuala Lumpur Interbank Offered Rate). However, alternative MYR rates are being considered.
Since it’s currently based on USD LIBOR, the Philippine Peso PHIREF (Philippine Interbank Reference Rate) will also demise or require modification from 30 June 2023. Industry discussions regarding the suitable replacement rate continue.
On 11 December 2020, the Singapore Steering Committee for SOR & SIBOR Transition to SORA (SC-STS)1 confirmed the discontinuation of the Singapore Interbank Offered Rate (SIBOR) 12-month setting after 31 December 2020 (which is now complete), SIBOR 6-month after 31 March 2022 and SIBOR 1-month and 3-month after 31 December 2024.
As USD LIBOR 1-month, 3-month and 6-month settings are used to compute the Singapore Dollar Swap Offer Rate (SOR), the SC-STS announced in its 31 March 2021 press release, that the SOR 1-month, 3-month and 6-month settings will cease immediately after 30 June 2023 in line with the USD LIBOR cessation date.
While SOR will only cease to be published after 30 June 2023, market participants are strongly encouraged by the SC-STS and the Monetary Authority of Singapore (MAS) to transition their SOR-based contracts to the Singapore Overnight Rate Average (SORA) in late 2021, whilst there is liquidity in both rates. Over the coming months, we will contact our clients with contracts referencing SOR that mature post June 2023 to discuss their transition solutions.
In line with the recommendations made by the SC-STS, clients and counterparties will no longer be able to sign new loans and securities contracts based on SIBOR with HSBC after 30 September 2021. Furthermore, HSBC has stopped offering loans based on the SOR since 1 May 2021 and clients and counterparties will no longer be able to sign new derivatives contracts based on SOR with HSBC after 30 September 2021, unless they are entered into for risk management purposes or to transition from legacy SOR positions (full list of exceptions is set out in the appendix B of the SC-STS paper).
We will offer SORA as an alternative to SOR and SIBOR where available and subject to eligibility criteria. More information on SORA is available on the Association of Banks in Singapore’s website.
As USD LIBOR is used to compute the Thai Baht Interest Rate Fixing (THBFIX), the Bank of Thailand (BOT) announced in March 2021 that all THBFIX settings will cease immediately after 30 June 2023, along with the cessation of USD LIBOR.
In line with the Bank of Thailand (BOT)’s recommendations, clients and counterparties will no longer be able to sign new loans, bonds, structured products and other securities based on THBFIX with HSBC after 30 June 2021 unless they mature before 30 June 2023.
We will offer the Thai Overnight Repurchase Rate (THOR) as an alternative to THBFIX where available and subject to eligibility criteria. More information on THOR is available on the BOT’s website.
1 The Committee was established by the Monetary Authority of Singapore (MAS) to oversee the industry-wide interest rate benchmark transition from SOR and SIBOR to SORA in August 2019.