Kasikornbank (KBank) has completed the first overnight indexed swap derivatives transaction based on the new Thai reference rate THOR, setting the stage for new markets for THOR-linked derivatives and cash products. Murex, a long-term technology partner to the Thai bank, facilitated the THOR mechanisms and configuration.

“This is a remarkable moment and an important milestone for KBank history and the local financial community to create a robust interest rate derivatives market based on THOR,” KBank capital markets business division head Thiti Tantikulanan said in a statement. “Our close collaboration with various stakeholders in Thailand, including the Bank of Thailand and the Murex teams, will contribute to the development of a liquid derivatives market based on the new benchmark rate after the LIBOR discontinuation at the end of 2021.”

In 2019, the Bank of Thailand, with inputs from the Thai Bankers’ Association and the Association of International Banks, established a steering committee to prepare commercial banks for the discontinuation of the London Interbank Offered Rate. Once the dominant reference rate for financial products such as derivatives, bonds and loans, LIBOR fell into disrepute following interest rate manipulation that had been going on as early as 2003.

The committee, of which KBank was a member, worked on a replacement rate for the Thai Baht Interest Rate Fixing contract (THBFIX), which LIBOR’s cessation puts at risk. That replacement rate is THOR, or Thai Overnight Repurchase Rate, which was finalized in April 2020.

Says Guy Otayek, chief executive officer of Murex APAC: “This first transaction powered by MX.3 is another great illustration of our unique expertise to help our client community transition away from LIBOR on data, analytics, operations and accounting, and provide them with the mechanisms to easily adopt new (risk-free rates)."