With Singapore ceasing the issuance of new loan products referencing the existing swap offer rate (SOR) at the end of April 2021, DBS reports strong traction among its small and medium-sized enterprise (SME) clients for loans that reference the Singapore overnight rate average (Sora).

The bank has issued more than S$450 million (US$339.4 million) in Sora-pegged loans as at end April 2021, just over six months after it launched the market’s first Sora-pegged business property loan. These now account for about a third of all new SME loans in Singapore issued by DBS.

This is yet another positive sign for Singapore’s transition towards Sora as its main interest rate benchmark. It’s important that SMEs are not left behind, says Joyce Tee, group head of SME Banking at DBS, as the financial industry progresses with the transition to a Sora-centred Singapore dollar interest rate market and the cessation of new SOR-linked loans from end-April 2021.

“SMEs form a significant cornerstone of Singapore’s economy and are critical to ensuring an orderly transition to the new interest rate benchmark,” Tee shares. “SMEs have responded positively to our outreach, with many making the decision to transit to Sora ahead of the industry’s schedule.”

With the impending discontinuation of interest rate benchmarks like the London interbank offered rate (Libor), the bank has been partnering its clients to achieve a smooth transition to alternative risk-free benchmark rates. In Singapore, all financial institutions will cease to offer new loan products referencing the existing SOR by the end of April 2021.

Additionally, the Singapore interbank offered rate (Sibor) will cease to be used in new loan products by the end of September 20212. 

Along the way, DBS priced Singapore’s first Sora-referenced floating rate note, closed the first Sora club loan coupled with a cross currency swap, and launched Singapore’s first business property mortgage loan referencing Sora.