IBOR transition in Asia-Pacific

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 28 April 2023, of the expected changes to contracts denominated in different currencies in Asia-Pacific. 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 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 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.

In June 2021, China Foreign Exchange Trade System (regulated by PBOC) published sample switch provisions which contain three set of sample switch provisions applicable to new LIBOR-based USD loans, existing LIBOR-based USD loans and new SOFR- based loans respectively. The sample switch provisions provide basic switch mechanism and details as to when/how to switch. Although PBOC does not expressly state that the sample switch provisions are mandatory, it is expected that the local market players will follow them to the largest extent.

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

The HKMA also reemphasised global guidance to stop new use of USD LIBOR, except under certain limited circumstances, and also to transition USD LIBOR referencing products to alternative rates in advance of demise, following the ARRC’s guidance (see the Introduction to IBOR transition page for more detail).

The replacement of Indian Rupee MIFOR (Mumbai Interbank Forward Offer Rate) is Modified MIFOR, whereas the ISDA fallback is Adjusted MIFOR. Both Modified MIFOR and Adjusted MIFOR are currently being published by the Indian benchmark administrator FBIL. Since MIFOR is currently based on USD LIBOR, the current form of MIFOR is also demising after 30 June 2023. As part of IBOR transition, the use of MIFOR benchmark has been prohibited for new contracts except under certain circumstances. Furthermore, the MIFOR/Modified MIFOR benchmark, as per local Indian regulation, is only available for use in the interbank market.

IndONIA (Indonesia Overnight Index Average) has been affirmed by Bank Indonesia as the RFR for IDR interest rate benchmark overnight tenor, replacing overnight JIBOR (Jakarta Interbank Offered Rate), which has ceased to be published by Bank Indonesia since January 2019.

As for the non-overnight benchmark, Bank Indonesia has published IndONIA Index and Compounded IndONIA since end of 2022, temporarily in parallel with JIBOR publication for 1-week to 12-month tenor. Non-overnight JIBOR will cease to be published in 2025, though the exact timeline has not yet been fixed by Bank Indonesia. The Indonesian National Working Group on Benchmark Reform (NWGBR) has recommended that financial institutions cease to use JIBOR in new contracts from 30 June 2024. More information on IndONIA is available on the BI’s website.

All Japanese Yen LIBOR (JPY LIBOR) settings have ceased to be published since 31 December 2021 (31 December 2022 for Synthetic JPY LIBOR).

HSBC is offering Tokyo Term Risk Free Rate (TORF), Tokyo Overnight Average rate (TONA) or other alternatives to JPY LIBOR where available and subject to eligibility criteria.

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 TORF and TONA as the RFR alternative to JPY LIBOR, where appropriate. The Tokyo Term Risk Free Rate (TORF) is also an available alternative term benchmark administrated by QUICK Benchmarks Inc. (QBS) for certain products that require a forward-looking rate.

Considering the developments in international financial benchmark initiatives, JBATA has started to discuss the integration of JPY TIBOR and Euroyen TIBOR, with the plan of Euroyen TIBOR being discontinued. To improve the robustness of both TIBORs as benchmarks, JBATA initiated public consultation on fallback issues for TIBORs in August 2022 from a wide range of market participants and released the results of public consultation in March 2023. JBATA’s view is that (i) users of Euroyen TIBOR should promptly consider the introduction of fallback provisions for contracts that will mature after the end of December 2024; and (ii) users of JPY TIBOR should consider the introduction of fallback provisions while taking a practical approach (e.g. starting from new contracts) can be considered.

More information on TORF, TONA and TIBOR is available on the QUICK Benchmarks' website, the BOJ’s website and on the JBATA’s website.

Currently, there is no cessation timeline for the Korean Won CD (Certificate of Deposit). In fact, Korean Won CD is expected to remain as it has, together with KOFR (KRW Repo Rate, i.e. Korea Overnight Financing Repo Rate), been selected to serve as key benchmarks for the Korean Won.

The publication of the 2- and 12- month Malaysian Ringgit (MYR) KLIBOR (Kuala Lumpur Interbank Offered Rate) has been discontinued (effective 1 January 2023). The Malaysia Overnight Rate (MYOR) was launched as the fallback for KLIBOR and as the new alternative reference rate which will run in parallel to the KLIBOR.

The Singapore Interbank Offered Rate (SIBOR) 6-month and 12-month settings have been discontinued. SIBOR 1-month and 3-month settings will cease 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 Steering Committee for SOR & SIBOR Transition to SORA1 (SC-STS) announced in its 31 March 2021 press release, that the SOR overnight, 1-month, 3-month and 6-month settings will cease immediately after 30 June 2023 in line with the USD LIBOR cessation date.

In line with the recommendations made by the SC-STS, HSBC has stopped offering SOR-linked contracts and SIBOR-linked contracts save for certain SOR derivatives contracts for risk management of and transition from legacy SOR positions (details of exceptions are set out in annex 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, HSBC has stopped offering new products based on THBFIX except in certain specific circumstances for derivatives (such as for risk management purposes for a pre-existing position).

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.