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March 16, 2022

The latest developments across jurisdictions

Benchmark reform in the Asia-Pacific

Xiao Xiao
Head of Derivatives and Regulation, APAC
Michelle Wong
Regulatory Research Specialist

Across the Asia-Pacific, countries are at varying stages of developing their own risk-free rates as alternatives to interbank offered rates (IBOR) after certain LIBOR settings were officially ceased at the end of 2021.

In March 2021, the Financial Conduct Authority (FCA) formally announced the cessation roadmap of all LIBOR currency tenor settings, with GBP LIBOR, EUR LIBOR, CHF LIBOR and JPY LIBOR ending in December and certain tenor settings of the USD LIBOR discontinuing by the end of June 2023.

LIBOR transition has since been accelerated, with ICE actively transitioning existing products to the new benchmarks and offering new products to support liquidity buildup of the new rates such as SONIA and SARON. We also actively onboard the new rates to our data and analytics products to support clients in their benchmark reform programs.

Jurisdictions in APAC have different progress and approaches in their benchmark reform programs, reflecting differing levels of urgency depending on the calculation methodology of their original rates.


Since JPY LIBOR was one of the earliest rates to be ceased, Japan had little choice but to speed up its benchmark transition after the formal announcement, with 2,000 trillion yen of LIBOR contracts still outstanding back in 2020.

Japan has identified a new risk-free rate known as TONA (Tokyo Overnight Average Rate) as the alternative. However, the rate does not provide market participants advance knowledge and certainty of their interest rate obligations, which can be valuable to some market participants who want or need to plan cash flows in advance to make interest or coupon payments.

With this in mind, like UK and US regulators, Japan Financial Services Agency also come up with a term risk-free rate called TORF (Tokyo Term Risk Free Rate) based on TONA, which allows the payment amount to be known in advance. However, sufficient liquidity of the underlying OIS market remains a concern in the market.

Despite these two risk-free alternatives, Japan is not completely moving away from an interbank offered rate. JPY TIBOR, the onshore Tokyo interbank offered rate published by the Japanese Bankers Association, remains a viable benchmark in the country. Improvements were even made to the benchmark in 2017 to enhance transparency of the calculation and the submission rates from banks.

As a result, three alternatives comprising both interbank offered rates and risk-free rates are available in Japan. While it offers market participants flexibility in choosing a rate that best suits their circumstances, it may slow the buildup of liquidity in certain benchmarks.

Transition aside, Japan has made good progress in moving away from JPY LIBOR. Much has happened since we last provided an update on the benchmark reform progress in APAC. By the end of December 2021, 99% of LIBOR-based derivatives and bonds reported by 42 surveyed institutions have already transitioned away from JPY LIBOR successfully. In case of any tough legacy contracts that cannot feasibly be transitioned away from JPY LIBOR despite best efforts, the use of synthetic JPY LIBOR was permitted, but only under the regulator’s close monitor.

Singapore, Thailand, India, Philippines

After Japan, benchmark reform in Singapore, Thailand, India and Philippines appears most imminent given the calculation of their initial benchmarks is based on USD LIBOR, which will be discontinued by June 2023.

While Japan has allowed both interbank offered rates and risk-free rates to co-exist as alternative reference rates to its outgoing benchmark, Singapore is moving away from its interbank offered rates and focusing on building liquidity for a single risk-free rate, SORA (Singapore Swap Offer Rate).

In Singapore, the two dominant benchmarks were SOR (Singapore Swap Offer Rate) and SIBOR (Singapore Interbank Offered Rate), which will be discontinued in June 2023 and by December 2024 respectively. A fallback rate (SOR) will also be available for a temporary three years for tough legacy contracts.

The adoption of SORA has been picking up in the market, with SORA derivatives volume surpassing that of SOR derivatives by August 2021. In the cash market, domestic systemically important banks’ exposure to SORA products also grew to approximately S$4.2 billion in the end of April 2021.

Similarly, Thailand will switch its benchmark from THBFIX (Thai Baht Interest Rate Fixing) to THOR (Thai Overnight Repurchase Rate).

Financial institutions in Thailand are expected to stop offering new derivatives referencing THBFIX from July 2022 and gradually reduce its total outstanding contracts maturing after 2025 to 50% by mid-2022 and to 25% by the end of this year.

Meanwhile, India has advised banks to move from MIFOR (Mumbai Interbank Forward Outright Rate) to modified MIFOR for new contracts, which uses the adjusted SOFR rate and the benchmark administrator’s Forward Premia Rate. An adjusted MIFOR was also offered as a fallback rate for legacy contracts.

In the Philippines, the benchmark administrator of PHIREF (Philippine Interbank Reference Rate) has recommended a fallback rate for legacy trades, using similar methodology to PHIREF but utilizing SOFR with a spread rather than LIBOR.

The Rest of APAC

While certain countries face urgency to transition given an outgoing benchmark, other APAC countries are operating a different pace. Jurisdictions like Australia, Hong Kong and New Zealand have no intention to cease their initial benchmarks but are also building their own risk-free rates concurrently to serve as a fallback and to align with global standards.

However, institutions in the region should not be complacent. Hong Kong, for example, as the world’s third largest USD trading centre, had a huge LIBOR exposure even larger than its HIBOR exposure back in 2020. The Hong Kong banking sector has then made good progress in preparing for the transition from LIBOR to alternative reference rates (ARRs) according to Hong Kong Monetary Authority, including re-negotiating LIBOR contracts, remediating nearly all contracts referencing the LIBOR settings and putting in place fallback plans. Institutions have followed the HKMA’s guidance by ceasing the issuance of new LIBOR contracts. Meanwhile, many have already carried out transactions referencing ARRs and the banking sector’s outstanding amount of ARR exposures continues to grow.

On the other hand, South Korea has announced that the overnight repo rate of government bonds and monetary stabilization bonds was selected as an alternative and fallback rate for the CD (Certificate of Deposit) rate. Malaysia also announced MYOR (Malaysia Overnight Rate) to be the new alternative reference rate for KLIBOR (Kuala Lumpur Interbank Offered Rate). Note that Malaysia Islamic Market Technical and Development Committee (IMTDC), will develop a new Islamic benchmark rate to replace the Kuala Lumpur Islamic Reference Rate (KLIRR) by the first half of 2022.

Jurisdictions in APAC face vastly different situations, which are informing a variety of approaches to benchmark transition across the region. And with just 16 months before another key benchmark is discontinued, much work remains to be done by the industry.