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LIBOR TransitionVirtual Client Briefing Session 8 and 10 December 2020

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Introductory Remarks

OUR PANEL

Kamini

Rambausek

Arpit

Mehrotra

Ryan

Goh

Change Lead,

IBOR Transition

Programme

Business Lead,

IBOR Transition

Programme

Associate Director,

Rates Trading

1

Tiak Peow

Phua

Executive Director

Conduct, Financial

Crime and Compliance

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Help ensure you are kept up to date with the latest transition-related regulatory and market developments.

Help you understand the developments in key product groups including the Bank’s RFR product capabilities.

Help ensure you are clear on the next steps on the Bank’s engagement with you as we move into 2021.

The primary objectives of this virtual briefing session is to update on:

▪ Regulatory and industry working group developments as we progress in the transition away from London

Interbank Offered Rate (LIBOR) and other IBORs.

▪ Our Bank’s capabilities to transact in Risk-Free Rates (RFRs) and offer RFR-linked products.

1.2 Key outcomes

Help ensure you are aware of the important elements and considerations in your transition planning.

2

1.1 Session Objectives

1. Introduction

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The Sterling Overnight

Index Average (SONIA)

and the Secured

Overnight Financing

Rate (SOFR) are

announced to replace

GBP and USD LIBOR

respectively.

202020192017 2018

The Financial Conduct

Authority (FCA): “markets

need to end their reliance

on LIBOR post 2021”.

The European Central

Bank (ECB) publishes

the Euro Short-Term

Rate (€STR) as RFR to

replace the Euro

Overnight Index Average

(EONIA).

SOFR index introduced.

FCA announces they will

no longer compel banks

to submit LIBOR.

Q2

Q3 “Dear CEO” letter jointly

issued by the FCA and

the Prudential Regulatory

Authority (PRA) to 15

market participants.

Q3

Q3

Q4

Central Counterparty (CCP)

discounting switch from

EONIA to €STR

International Swaps and

Derivatives Association

(ISDA) 2020 IBOR

Fallbacks Supplement

and Protocol

Q1

Q3

Q4

2. Transition Timelines: Journey to date

2.1 Key milestones

Q4 Alternative Reference

Rate Committee (ARRC)

publishes summary of

recommended fallback

language to date for

USD cash products.

3

Launch of the IBA

ConsultationQ4

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2. Transition Timelines: IBA Consultation

2.2 IBA intention to consult on LIBOR setting cessationOn 4 December 2020, ICE Benchmark Administration (IBA) has launched a consultation on its intention to cease the publication of

LIBOR settings

What is the proposed LIBOR publication cessation timeline?

The IBA consultation is intended to provide market participants with details on its intention to cease publication of LIBOR settings from the

following proposed dates:

4

What does this mean for USD LIBOR?

If the proposals are adopted, USD LIBOR settings will continue for all but two tenors until 30 June 2023. The FCA has published a statement

supporting the IBA announcements, as “this will incentivise swift transition, while allowing time to address a significant proportion of the legacy

contracts that reference USD LIBOR”. The Fed has also supported this move, as the IBA and FCA statements “lay out a path forward in which

banks should stop writing new USD LIBOR contracts by the end of 2021, while most legacy contracts will be able to mature before LIBOR

stops.”.

The continued expectation is that for new transactions, market participants should continue to actively transition away from LIBOR to RFR as

soon as possible and no later than 31 December 2021. US regulators have also stated that entering into new USD LIBOR contracts after 31

December 2021 would create safety and soundness risks, and that firms should only expect very limited carve-outs for USD LIBOR use after

end-2021. The FCA has also indicated that it will consult on restricting use of where a rate has known cessation date

30 June 2023

All remaining USD LIBOR settings including:

▪ USD LIBOR – Overnight, one month, and three, six and twelve months

How will the consultation work?

The consultation is open to stakeholders including panel banks, industry bodies and end-users, who have until 25 January 2021 to provide

feedback. The IBA will then publish a statement shortly afterwards summarising the responses to the consultation for all 35 LIBOR settings.

31 December 2021

▪ EUR LIBOR: All tenors1

▪ CHF LIBOR: All tenors

▪ JPY LIBOR: All tenors

▪ GBP LIBOR: All tenors

▪ USD LIBOR: One week and two month tenors

1The tenors are: overnight, one week, one month and two, three, six and 12 months

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2. Transition Timelines: IBA Consultation

2.2 IBA intention to consult on USD LIBOR cessation extensionImplications for LIBOR and remaining currencies due to IBA consultation

Subject to the consultation outcome, what are the implications for clients?

▪ Despite the possible extension to cessation of USD LIBOR, the industry is in the final stages of LIBOR’s demise with

the consultation designed to provide additional time to remediate certain existing USD LIBOR contracts

▪ Following the conclusion of the consultation, a cessation announcement or cessation announcements of all tenors of

USD, GBP, JPY, CHF and EUR LIBOR settings could trigger the calculation of spread adjustments with a fixing on

that announcement date for all of the LIBOR settings

▪ Based on the consultation, USD LIBOR is likely to remain representative until their proposed cessation dates. Firms

will need to consider implications arising from these staggered cessation dates

▪ An extension would allow in scope USD LIBOR contracts maturing prior to July 2023 to expire without need for

remediation

▪ Clients with USD LIBOR exposures maturing beyond June 2023 are stilll likely to remediate their contracts, pending

any solution that may be proposed by the Alternative Reference Rate Committee (ARRC) and/or regulators

Next

steps

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What should market participants do now?

The extended timeline for certain USD LIBOR settings set out a clear path to support USD LIBOR transition, and

should not be viewed as a delay to transition by market participants. As such priorities for firms should remain largely

unchanged:

New Transactions

▪ Market participants should continue to consider and execute new transactions in Risk-Free Rates (RFRs) where

possible, and ahead of industry milestones to stop using LIBOR in new transactions

▪ Where firms trade LIBOR products, they must ensure that appropriate hardwired fallbacks are put into place

Existing LIBOR Exposures

▪ Firms should analyse their contracts by tenor and currency to identify the population of USD LIBOR transactions that

mature prior to 30 June 2023 and monitor the outcome of the IBA consultation to determine the next steps on these

contracts

▪ Develop scenarios and contingency plans for consultation outcomes, such as impacts on transaction pricing,

hedging costs, resource requirements for contract remediation and client communications

Potential

Implications

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ILLUSTRATIVE

LIBOR RFR

Today

Q1 2021 Targeted cessation of new

GBP LIBOR cash

issuances & linear

derivatives

KE

Y I

ND

US

TR

Y M

ILE

ST

ON

ES

Q3 2021Cease offering GBP

LIBOR non-linear and

cross-currency

derivatives

H1 2021ARRC

recommends

forward-looking

SOFR term rate

Q2 2021Complete active

conversion of

GBP LIBOR cash

products

2.3 Q4 2020 to End 2023

Regulators and industry bodies have set key milestones to ensure as smooth and orderly transition as possible. Upcoming are:

20222021Q4

2020

Q4 2020Targeted cessation of

new USD LIBOR

Floating Rate Notes

(FRN)

Q1 2021Effective Date of ISDA

Fallbacks

Supplement and

Protocol

Q4 2021Expected cessation

of

GBP,EUR,JPY,CHF

LIBOR

2. Transition Timelines: Key Upcoming Milestones

Q2 2021Cease new USD LIBOR

business loans,

securitisations and

derivatives2

2https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2020/ARRC-Best-Practices.pdf6

Q4 2020Expected forward-

looking Term

SONIA Reference

Rates

2023

H1 2023Expected cessation

of USD LIBOR

(O/N,1M, 3M, 6M

and 12M)

Q1 2022EBR Transition

provisions end

Q4 2021Expected cessation

of USD LIBOR

(1w and 2M)

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3. Updates on Other IBORs

3.1 To Be Discontinued/Discontinued IBORs

Beyond the transition of the five key LIBORs, there are a number of other jurisdictions undergoing their own interest rate benchmark

review, some of which are noted below.

India MIFORThe Reserves Bank of India (RBI) noted a need to replace the Mumbai Interbank Forward Outright Rate

(MIFOR), which uses USD LIBOR in its calculation, however no such replacement has been identified todate.

To

Be D

isc

on

tin

ue

d /

Dis

co

nti

nu

ed

IBO

Rs

Philippines PHIREFThe Philippine Interbank Reference Rate (PHIREF) utilises USD LIBOR as a calculation input. However, no

alternative has been identified to date. The Bankers Association of the Philippines, PHIREF’s administrator,

intends to establish a replacement reference rate for PHIREF.

SingaporeSIBOR &

SOR

The Singapore Interbank Offered Rate (SIBOR) is pending discontinuation in phases as follows; 12-month

on January 2021, six-month after the end of 2021, one-month and three-month in 2024. The Swap Offer

Rate (SOR) uses USD LIBOR in its calculation and therefore will be affected by a USD LIBOR

discontinuation. The Singapore Overnight Rate Average (SORA) has been identified the alternative

benchmark

Sri Lanka SLIBOR

The Central Bank decided to stop publishing Sri Lanka Interbank Offered Rate (SLIBOR) from July 2020 and

market participants are encouraged to transition to alternative rates such as the policy rate, Average

Weighted Call Money Rate (AWCMR), Average Weighted Prime Lending Rate (AWPR), or Treasury bill

yields.

South AfricaJIBAR &

SABOR

The Market Practitioners Group (MPG) raised concerns regarding Johannesburg Interbank Average Rate

(JIBAR) in its current form, however until an alternative reference rate can be found, it will be reformed. The

South African Reserve Bank implied that JIBAR may cease in 2024. In addition, the benchmark proposed as

a replacement for South African Benchmark Overnight Rate (SABOR) is the South African Rand Overnight

Index Average (ZARONIA), which is an unsecured overnight rate.

Thailand THBFIX

The Bank of Thailand (BoT) has announced that all financial institutions must cease offering new Thai Baht

Interest Rate Fixing (THBFIX) products from 1 July 2021. BoT will temporarily publish the Fallback Rate

(THBFIX) for legacy contracts, but firms should be ready now to offer products linked to the Thai Overnight

Repurchase Rate (THOR)

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3. Updates on Other IBORs

3.2 Reformed IBORs

Beyond the transition of the five key LIBORs, there are a number of other jurisdictions undergoing their own interest rate benchmark

review, some of which are noted below.

8

Refo

rme

d

Thailand BIBOR

Bangkok Interbank Offered Rate (BIBOR) was reformed on 1 April 2015. BIBOR will co-exist with the

Thai Overnight Repurchase Rate (THOR) whilst the Thai Baht Interest Rate Fixing (THBXFIX) will be

phased out in 2024.

Indonesia JIBORThe Jakarta Interbank Offered Rate (JIBOR) has been reformed as of January 2019. The Indonesia

Overnight Index Average (INDONIA) will replace overnight JIBOR.

Hong

KongHIBOR

The Hong Kong Interbank Offered Rate (HIBOR) will co-exist with the HKD Overnight Index Average

(HONIA).

China SHIBOR

The People Bank’s of China (PBOC) on 31 August 2020 published a whitepaper on the development

priority of China's interbank benchmark interest rate system, noting that although Shanghai Interbank

Offered Rate (SHIBOR) shares similar characteristics to LIBOR being a quote-based rate, there are no

plans to discontinue the rate.

Australia BBSWThe Bank-Bill Swap Rate (BBSW) will continue alongside the AUD Overnight Index Average (AONIA).

Reforms have also been undertaken to enhance the robustness of these benchmarks.

Canada CDOR

Canadian Dollar Offered Rate (CDOR) has been reformed and is intended to co-exist with the Canadian

Overnight Repo Rate Average (CORRA) however the six and twelve month CDOR tenors will be

discontinued by 17 May 2021. The remaining tenors are not expected to cease.

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Notable RFR issuances Regulatory communications

Transition milestones

4.1 IBOR Reform in the East

There has been heightened regulatory focus over the course of 2020 on IBOR transition across the Asia Pacific region, particularly in

Singapore, Japan and Thailand, whilst other nations such as China and India have also highlighted the need for reform.

4. Updates on Key Markets: Developments in the East

▪ Nov 2020 – OCBC Bank launched first SORA-

based green loan (SGD71 million).

▪ Sept 2020 – DBS Bank and Industrial and

Commercial Bank of China, Singapore issued the

first SORA-pegged club loan (SGD200 million).

BNM – Complete operational readiness

assessment for RFRs

BoJ – Complete staff training on LIBOR

Quarter 1 2021

Quarter 2 2021Quarter 4 2020BNM – LIBOR derivative contracts to have

fallback provisions

HKMA – FI’s to offer LIBOR alternatives

BoT – FI’s to offer THOR loans, insert fallbacks into

LIBOR contracts and cease issuance of new LIBOR deals

MAS – Significantly reduce SOR derivatives

BoJ – Significantly reduce LIBOR loans and bonds

BNM – No new LIBOR deals

BoJ – JPY Term rate publication

MAS – No new LIBOR deals after April

Quarter 3 2021

▪ Oct 2020 – Siam Commercial Bank launched the

market’s first THOR-linked structured notes.

▪ Sept 2020 – Kasikornbank has completed the first

THOR Overnight Indexed Swap (OIS).

Quarter 4 2021

BoT – End of THBFIX

▪ The RBI has noted the need to replace MIFOR, with the overnight

Mumbai Interbank Outright Rate (MIBOR) and the Market Repo

Overnight Rate (MROR) as possible successors however no rate

has been specifically identified to date.

▪ The Hong Kong Monetary Authority (HKMA) has issued a note to

firms reiterating the importance of fair treatment of clients throughout

the LIBOR transition. Firms are reminded to uphold the customer

protection principles set out in the Treat Customer Fairly Charter,

Code of Banking Practice, and other applicable requirements.

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Notable RFR issuances

Recent regulatory communications SOFR Stats (per CME November 2020 rates recap)

4.2 IBOR Reform in the West

The UK and US continue to lead transition efforts in the west, however the Swiss market has made significant progress in the issuance

of RFR-linked products whilst in Europe the working group on euro risk-free rates is consulting on the Euro Interbank Offered Rate

(EURIBOR) fallbacks.

4. Updates on Key Markets: Developments in the West

▪ The FCA has updated its Q&A’s on conduct risk for LIBOR

transition regarding how firms can demonstrate a fair spread

adjustment has been applied to contracts when actively

converting LIBOR contracts to RFRs.

▪ Oct 2020 – The UK market saw a first-of-its-kind loan to

reference SOFR and SONIA from day-one, with the

Standard Chartered involved in the GBP2.5 billion Revolving

Credit Facility (RCF) for Tesco PLC.

▪ Nov 2020 – The Loan Market Association (LMA) has

continued to publish its List of RFR referencing

syndicated and bilateral loans.

▪ Sept 2020 – GlaxoSmithKline refinanced two

revolving credit facilities linked to SONIA and SOFR

compounded in arrears, involving 12 major banks.

.

▪ Oct 2020 – The Baloise Bank, Bank Zimmerberg and

Nidwaldner Kantonalbank have launched SARON-linked

mortgages.

▪ Oct 2020 – Raiffeisen issued its first product featuring the

SARON Floating Rate Notes fallback language prescribed

by the Swiss working group.

▪ Q1 2020 – The European Investment Bank (EIB)

issued two SONIA-linked FRN’s worth GBP1 billion

and GBP500 million

▪ Oct 2019 – EIB issue first €STR bond of EUR1 billion

Issuances to

date

Swaps cleared to

date

Three-month Futures –

average daily volume

USD820

billion

USD327

billion

98,000

contracts

▪ The ECB has published two consultations on the events that

would trigger a EURIBOR fallback and which €STR-based

rates would be most appropriate in the event of a fallback

scenario.

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5. Updates on Key Markets: Loans

5.1 Loans Markets: Business Loans | Syndicated Loans

Development of fallbacks for loan products gained significant momentum as the Loan Market Association (LMA) and the ARRC have

provided further updates on documentation.

What has been published?▪ ARRC has published in arrears conventions for bilateral business

loans and FAQs for business loans hardwired fallback language.

▪ The LMA has published revised exposure draft switch facilities,

for lending transactions, along with term sheets for the use of

compounded RFRs with the replacement of screen rate language.

▪ LSTA has recommended that loan amendment fees should be

waived, if the changes incorporate ARRC’s hardwired (or similar)

fallback language.

▪ The Sterling RFR Working Group (RFRWG) has provided

recommendations on the credit adjustment spread methodology for

fallbacks in cash products and published a paper on active Transition

of GBP LIBOR loans.

▪ Transition away from LIBOR is comparatively slower in loan markets

than in derivatives and bonds markets.

▪ The Bank has concluded deals via participation in syndicated

facilities and have dealt bilateral RFR loans.

▪ For Bilateral loans and syndicated loans where the Bank is

not the Agent Bank, SCB is ready to deal at-scale in new RFR

loans in SONIA/SOFR/ESTR/SORA across 20 booking

locations.

▪ For syndicated loans where SCB is the Agent Bank, SCB

has the capability to support up to 10 lenders (at-scale

capabilities expected to be in place by Q1 2021).

Quarter 1 2021

Quarter 2 2021

Quarter 3 2021

Cease issuance of GBP LIBOR

loans maturing beyond 2021

Apr – No new SOR loans maturing beyond 2021

Jun – No new USD LIBOR loans maturing beyond 2021

Fallbacks

for IBORs

New RFR

Loans

Industry

Timelines

11

Quarter 4 2020

Inclusion of fallbacks for USD

LIBOR bilateral loans

Bank of Japan (BoJ) targets

cessation of new LIBOR-linked loans

Quarter 4 2021

Expected cessation of GBP,EUR,JPY,CHF

LIBOR and USD LIBOR (1w,2M)

Quarter 2 2023

USD LIBOR (O/N, 1M, 3M, 6M,12M)

Cessation

What it means for you?▪ The Bank is in the process of reaching out to clients

with LIBOR-linked loans to communicate next steps and

discuss transition options.

▪ From Q4 2020 onwards, any new LIBOR loans must

include the new contractual arrangements as

recommended by the Sterling RFR WG.

▪ The Bank will continue to reach out and provide

updates on further market developments.

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6. Updates on Key Markets: Bonds

What has been published?▪ ICMA published a quick guide to the transition for bond

markets while the International Capital Market Services

Association (ICMSA) published a potential timeline for bond

markets remediating exposures via consent solicitation.

▪ ARRC published recommendations on more robust fallback

languages for new issuances of USD LIBOR Floating Rate

Notes and Securitisations.

▪ Sterling RFRWG has published a paper on Active Transition

of GBP LIBOR bonds.

What it means for you?▪ The Bank expects to reach out to its clients with

LIBOR and other relevant IBOR-linked bonds in

early 2021 to communicate next steps and

transition options.

▪ The Bank will keep you informed throughout this

process and provide updates with regard to

market developments.

▪ New RFR bonds have been issued as well as a number of

consent solicitations to convert GBP LIBOR bonds to SONIA.

▪ Market conventions for RFR bonds are still being developed

e.g. Lookback, Payment Delay, Lockout.

▪ RFR-linked bonds may be offered on a case by

case basis based on client needs.

▪ Take note of publication of daily SONIA index

which began in August 2020.

ARRC targets cessation of

new USD LIBOR FRNs

Quarter 1 2021

Quarter 2 2021Quarter 4 2020

BoE targets cessation of new

GBP LIBOR cash issuance

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ARRC – No new USD LIBOR CLOs

BoJ – significantly reduce LIBOR bonds

ARRC targets cessation of

new USD LIBOR securitisations

Quarter 3 2021

6.1 Bond Markets: Bonds | Floating Rate Notes | Securitisations

Developments across the bond market have been led by different working groups and industry bodies. The International Capital Market

Association (ICMA) and ARRC have issued guidance and publications on various fallbacks and market conventions.

Fallbacks

for IBORs

New RFR

Bonds

Industry

Timelines Quarter 4 2021

Expected cessation of GBP,EUR,JPY,CHF

LIBOR and USD LIBOR (1w,2M)

USD LIBOR (O/N,

1M, 3M, 6M,12M)

Cessation

Quarter 2 2023

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7. Updates on Key Markets: Derivatives

7.1 Derivatives Markets: Swaps | Options | Futures | Forward Rate Agreements (FRAs)

On 23 October 2020, ISDA published the 2020 IBOR Fallbacks Protocol and revised Supplement, effective 25 January 2021. This is a

result of a series of consultations conducted by ISDA with industry participants and regulators and has an important role in driving

consensus on fallbacks for derivatives.

What has been published?▪ Amended 2006 Definitions (the “Supplement”) reflects

updates to certain ‘floating rate options’ included in the

existing 2006 ISDA Definitions.

▪ 2020 IBOR Fallbacks protocol (the “Protocol”) allows

for multilateral amendments to be made to legacy

contracts (to incorporate the amended floating rate

options) between adhering counterparties.

What does this mean for you?▪ The Bank will reach out to its clients to

understand their position regarding adherence

to the Protocol and next steps if bilateral

negotiations are preferred.

▪ The Bank will be hosting virtual briefing

sessions throughout Q4 2020 and will provide

more information and key considerations in

relation to ISDA’s announcement.

▪ Both SOFR and SONIA have experienced high trade

count growth year to date as per ISDA’s benchmark

reports.

▪ General positive trend of trading volumes in RFR-linked

interest rate derivatives.

▪ The Bank currently has capabilities across all

active RFR markets in derivatives. Options on

RFRs (caps, floors or swaptions) may be offered

on a case-by-case basis.

Publication of ISDA

Supplement and Protocol

October 2020

January 2021

Quarter 1 2021

Quarter 2 2021

Effective date of ISDA

Supplement and Protocol

No new GBP LIBOR linear

derivatives maturing post 2021

No new USD LIBOR

derivatives maturing post 2021

13

Fallbacks

for IBORs

New RFR

Derivatives

Industry

TimelinesQuarter 3 2021

Significantly reduce SOR

derivative exposure

Quarter 4 2021

Expected cessation of GBP,EUR,JPY,CHF

LIBOR and USD LIBOR (1w,2M)

USD LIBOR (O/N, 1M, 3M,

6M,12M) Cessation

Quarter 2 2023

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7.2 RFR adoption and Liquidity in key LIBOR markets

7. Updates on Key Markets: Derivatives

3 https://www.isda.org/a/Bi4TE/Transition-to-RFRs-Review-Q3-of-2020-and-Year-to-September-30-2020.pdf4 CME Monthly Market Stats 5 Weekly ISDA SwapsInfo data6 Bloomberg SOFR, SONIA and ESTR league tables

▪ SONIA-traded Interest Rate Derivative

notional closing at USD13.8 trillion3 in Q3

2020, up from USD10.2 trillion in Q2 2020.

▪ Significant growth for SOFR and SONIA

trade count, recording at 413% and 108%

respectively vs Q3 2019 levels.

▪ YoY SOFR trading volumes have grown

28% since Oct 2020.4

▪ Issuances in cash markets have also

continued with Financial Institutions

(FI’s) and corporates continuing to adopt

SOFR and SONIA.

▪ In Europe, EURIBOR continues to be

the preferred benchmark.

▪ Following the CCP Discounting Switch

for EUR derivatives in July 2020, €STR

trade count has increased by over 260%

in Q3 2020 vs Q2 2020.

€STR SONIA SOFR

Volume 2 20 334

Issuances 3 25 402

325

402

0

50

100

150

200

250

300

350

400

450

0

50

100

150

200

250

300

350

400

Nu

mb

er

of

iss

ua

nc

es

Vo

lum

e (

US

D B

illi

on

s)

Year-to-Q3 2020: RFR issuances and volumes6

Volume Issuances

14

0

500

1000

1500

2000

2500

3000

3500

0

500

1000

1500

2000

2500

3000

3500

Tra

ded

No

tio

nal (U

SD

Billio

ns)

Tra

de C

ou

nt

Monthly RFR Interest Rate Derivativenotional and trade count5

SONIA Notional SOFR Notional €STR Notional

SONIA Trade Count SOFR Trade Count €STR Trade Count

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7. Our RFR Product Capabilities - Derivatives

7.3 What we can offer clients – Derivative Markets

The Bank currently has capabilities across all active RFR markets in derivatives. Options on RFRs (caps, floors or swaptions) may be

offered on a case-by-case basis.

Currency RFR Transaction-Based Overnight Secured Other Comments Products Available Tenor

SOFR P P P

Covers multiple repo

market segments,

allowing for future

market evolution

▪ Interest rate swaps

(fixed vs SOFR)

▪ SOFR – USD LIBOR basis swaps

▪ SOFR – Fed Funds basis swaps

Up to 30

years

SONIA P P

Incorporates o/n

unsecured

transactions

Includes a volume-

weighted trimmed

mean

▪ Interest rate swaps

(fixed vs SONIA)

▪ SONIA – GBP LIBOR basis swaps

Up to 30

years

SARON P P P

Became the reference

interbank overnight

repo in August 2009

▪ Interest rate swaps

(fixed vs SARON)

▪ SARON – CHF LIBOR basis swaps

Up to 10

years

€STR P P

Reflects the

wholesale euro

unsecured o/n

borrowing cost

Complement existing

benchmark rates,

serving as a backstop

reference rate

▪ Interest rate swaps

(fixed vs €STR)

▪ €STR – EURIBOR

(or EUR LIBOR) basis swaps

Up to 30

years

TONA P P

Reflects the

unsecured o/n

call rate market

The BoJ calculates and

publishes the rate on a

daily basis

▪ Interest rate swaps

(fixed vs TONA)

▪ TONA – JPY LIBOR basis swaps

Up to 30

years

SORA P P

Reflects the

unsecured o/n

interbank

funding market

Published by MAS

since July 2005

▪ Interest rate swaps

(fixed vs SORA)

▪ SORA – SOR basis swaps

Up to 10

years

The product variants illustrate the most commonly traded products. If you are interested in more bespoke requirements, please reach

out to your relationship manager for more information.

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8. New RFR-linked Loans

8.1 RFR based Calculation Method for Lending

For RFR loans, there are a range of options available to price and settle RFR interest payments as noted below:

RFR Considerations

Rate

Calculation

Compounding: Takes into account the additional amount of interest

owed each day by applying the daily rate of interest both to the

principal borrowed and the accumulated unpaid interest component.

vs.Simple: The averaged RFR in this convention is the simple arithmetic

mean of the daily RFRs.

Cashflow

Certainty

In arrears: Interest rate is known at the end of the payment period.

Therefore no cash flow certainty until end of the interest period,

smaller window for lenders to calculate final interest payments

however rate will fully reflect market conditions over the interest

period.

vs.

In advance: Interest rate is set in advance at the start of the payment

period (i.e. LIBOR). Greater cash flow certainty for borrowers and larger

window for lenders to calculate final interest payments however rate can

become “out of date”.

Calculation

MethodsBank Status Convention Description

Lag/Look-back Permitted▪ The observation period for the interest rate calculation starts and ends a certain number of days prior to the interest period.

▪ This methodology is aligned to the derivative methodology with a five day lag period.

▪ This methodology is evidenced in the recent new RFR deals and the market appears to be coalescing to this option.

Lock Out with

True UpPermitted

▪ The RFR is no longer updated (i.e. frozen) for a certain number of days prior to the end of an interest period (lock out period).

▪ The RFR rate of the day prior to the start of the lock out period is applied to calculate the interest for the lock out period.

▪ Any interest rate differential between the actual rate for lockout period and the frozen rate for the RFR is accounted for (or “trued

up”) in the next interest rate cycle.

Delayed BillingPermitted

▪ The interest payments are delayed by a certain number of days and are thus due X number of days after the end of an interest

period.

▪ The idea is to provide more time for operational cash flow management.

▪ Contact the IBOR Lending Working group to discuss this option.

Lock Out with no

True UpNot Permitted

▪ The RFR is no longer updated (i.e. frozen) for a certain number of days prior to the end of an interest period (lock out period).

▪ The RFR rate of the day prior to the start of the lock out period is applied to calculate the interest for the lock out period.

To allow for additional time to calculate and settle payments, market conventions have been proposed. The Bank has capabilities today to

offer new RFR-linked loans and will continue to build capabilities based on development of preferred market conventions.

16Widely discussed in the market Convention discussed but there are no known contracts executed with this methodology

PUBLIC

Treasury Pricing

Sample timeline for a loan with 3-month interest settlement period

Delayed period

4th Apr

2021

31st Mar

2021

25th Mar

2021

1st Jan

2021

25th Dec

2020

True up

30th Jun

2021

RF

R P

ricin

g

Meth

od

olo

gy

Interest

Start Date

True up of Stale Rate vs Actual Rate,

to be settled in next payment period

Interest

End Date

Stale rate

period

8. New RFR-linked Loans

17

Lockout + No True up

Lockout + True up

Delayed Billing

Lookback

Stale rate

Stale rate

Settlement

Date

Delayed period till

settlement date

Observation

period

Base C

ase

Scen

ari

o

8.2 Illustration of RFR-based calculation method

Below illustrates the different RFR interest rate methods outlined on the previous slide with an example of a three-month interest period.

Clients can choose any interest period for the available calculation methods.

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8.3 What we can offer clients

The Bank currently has capabilities across all active RFR markets in lending products.

We are ready to support RFR pricing enquiries and can provide more granular product capabilities information upon request.

Clients are encouraged to familiarise themselves with the RFR product suite and to consider transacting once ready.

Currency LIBOR RFR

Term LoanOverdrafts and Transaction

Banking Products (Cash and

Trade Products)Bilateral

Syndicated

SC not as an

Agent

SC as an

Agent

USD LIBOR SOFR

20 booking locations are supported,

list available upon request.

Supported on a

limited basis

and restricted

up to 10

lenders.

Trade finance products are short

dated in nature and are

dependent on the Term Rates. In

the absence of RFR term rates,

current pricing will continue to

apply. While we monitor the

market developments, RFR

pricing will be made available in

line with the industry milestones

for GBP LIBOR and USD LIBOR.

GBP LIBOR SONIA

EUR LIBOR €STR

CHF LIBOR SARONRFR Cash products may be offered on a case by

case basis.JPY LIBOR TONA

SOR SORASupported subject to conventions as

SOFR/SONIA/ESTR.

8. Our RFR Product Capabilities - Lending and Trade

Capabilities

18

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9.1 Background to Forward-looking term RFRs

9. Forward-looking RFRs

19

When could they be available?

✓ In order to develop a forward-looking rate there first needs to be an

active overnight derivatives market which these forward-looking rates

are derived from. Insufficient liquidity has been a concern noted by

the ECB in developing a forward-looking RFR for the Eurozone.

✓ Forward-looking term rates should be available by end 2020 (SONIA)

and by H1 2021 for SOFR and JPY equivalents. No timeline has been

announced for €STR while no forward-looking SARON is expected

from Switzerland due to a predicted lack of liquidity.

✓ The current RFR tenors are calculated using backward-looking

observed overnight rates, this poses a number of challenges including:

1. Operational challenges for lenders and clients who cannot

transact in backward-looking rates.

2. Backward-looking rates could create uncertainty and lack of

visibility for borrowers on future interest payments which in

turn is problematic for cash flow management.

3. Unsuitable for certain derivatives (e.g. Caps, floors, Forward

Rate Agreements (FRAs)).

✓ The RFRWG determined that approximately 90% of the Sterling

LIBOR loan market can use SONIA compounded in arrears. However

this methodology would not be appropriate for the remaining 10%

including:

1. Smaller/Retail clients - need simplicity or payment certainty.

2. Trade and working capital products - use discounted cash

flows, need a clear rate as clients often can’t access live

market curves.

3. Export Financing/Emerging Markets – often need more

time to make interest/principal payments.

4. Islamic Banking - LIBOR and other relevant IBOR’s are

used in Islamic finance transactions as they are forward-

looking rates which enables the floating rate to be set at the

start of the calculation period for the contracts. It is

significantly more challenging to use backward-looking rates,

as the rate will not be known until the end of the calculation

period.

What should clients know when considering forward-looking term

RFRs?

✓ Regulators have emphasised clients should not wait for forward

looking RFRs to become available if they can transact in RFRs

compounded in arrears, and should continue liaising with their

vendors to enhance their RFR systems and capabilities.

What do clients need to do in relation to forward-looking RFRs?

✓ Review current exposures and identify any where the RFR

compounded in arrears approach may not be possible or appropriate.

✓ Assess operational/system readiness to use forward-looking term

RFRs once available/liquidity levels improve.

✓ Contact their relationship manager if they have any questions.

Why are forward-looking term rates needed?

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9. Forward-looking RFRs

US (SOFR) UK (SONIA) Japan (JPY) Europe (€STR)

Date ▪ Publication expected end H1

2021.

▪ The RFRWG has noted they

intend on removing the “beta” tag

to the current vendor rates by end

2020.

▪ Expected publication date of final

production rates by end H1 2021.

▪ Publication timing TBD.

▪ Testing to begin early 2021.

Vendors ▪ Currently unknown – RFP

process ongoing for a potential

vendor.

The following are all potential

vendors:

▪ ICE Benchmark administration

(IBA)

▪ Refinitiv.

▪ FTSE Russell.

▪ Quick Corp. The following providers are being

considered:

▪ IHS Markit

▪ European Money Markets

▪ Institute IBA (EMMI)

▪ Refinitiv

▪ FTSE Russell

Status ▪ ARRC released a RFP for

vendors to produce a rate for

one and three months and if

possible six months and a year.

▪ Beta term rates currently being

tested

First published rates as follows:

▪ IBA – 26 June 2020

▪ Refinitiv – 1 July 2020

▪ FTSE Russell – 06 July 2020

▪ QUICK Corp was chosen in

February 2020 following 2 market

consultations, to commence

developing a prototype JPY term

rate to replace JPY LIBOR,

based on JPY OIS.

Different vendors are beginning

testing at different times:

▪ IHS Markit - end of 2020

▪ EMMI - start of 2021

▪ Refinitiv and FTSE Russell have

not indicated when they will start

testing

Calculation

methodology

▪ The ARRC has mentioned in its

FAQs that the forward-looking

SOFR should be based on a

liquidity derivatives market.

▪ In the latest FAQs for the

forward-looking RFP, the ARRC

noted they have not specified

that any particular source of

transactions data for SOFR

derivatives is preferred over

another source, referring to OIS

versus futures data.

▪ All three potential vendors utilise

a waterfall structure between two

and four levels using SONIA OIS

quotes.

▪ Waterfall structure based on five

levels of Japanese OIS data.

Executed transaction data is used

first, followed by quote data if this

is not sufficient.

▪ All four potential vendors utilise a

waterfall structure using OIS and

futures data with between three

and six levels.

▪ EMMI IBA, Refinitiv and FTSE

Russell are all using OIS data

and futures committed quotes

from multilateral trading facilities

(MTFs) and exchanges.

▪ In comparison IHS Markit is using

OIS and futures trade data.

9.2 Expected timelines for completion

20

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10. Client Readiness and Preparations

21

10.1 Checklist of Key Considerations

The below points outline a summation of the key actions you should consider as part of the transition planning. The Bank has also

published a “Checklist for Success” for you to avail of on the LIBOR Transition webpage.

Understand Key Developments

▪ Familiarise yourself with the Transition of LIBOR and other relevant IBORs, the Bank’s efforts to date and the potential impact to you.

Assess Exposure

▪ Understand the extent of your business’ exposure to LIBOR and other relevant IBORs and quantify how much exposures mature beyond

the end of 2021.

Determine Legal Impact

▪ Understand what the ISDA Protocol is and the impact it may have to legal and contractual documentation.

Accounting Considerations

▪ Review your LIBOR and other relevant IBOR exposures and hedging relationships with regards to the International Accounting Standards

Board (IASB) phase 2 amendments for benchmark reform.

Operational Considerations

▪ Upgrades to systems linked to LIBOR and other relevant IBORs to allow for trade bookings, treasury, reporting and develop pricing

mechanisms based on RFRs.

▪ Develop plans to ensure all system and process changes are executed, tested, and validated in time for the transition.

▪ Assess the contractual terms and strength of fallbacks referenced.

Understand the Risk & Treasury Impact

▪ Consider the implications on treasury and risk management systems and processes.

Transfer to RFR Products

▪ Familiarise yourselves with the Bank’s RFR product capabilities and consider your suitability according to your business needs.

Communicate with Impacted Parties

▪ Engage in conversations with your counterparties to discuss the impact of the transition on current arrangements.

▪ Raise awareness and educate relevant employees within the organisation.

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11. The Bank’s Response

22

.

The Bank is actively participating in many of the industry working groups aimed at facilitating an orderly transition

away from LIBOR, and continuously monitoring market developments in order to align to the best practice.

The Bank is continuously monitoring the ongoing developments associated with the transition and will align

accordingly.

The Bank is ensuring our people understand the transition, how it affects you and what is required going forward.

The Bank is committed to partnering with and assisting you through the transition.

The Bank has already introduced RFR-linked products and will continue to develop RFR capabilities.

The Bank has established a global IBOR Transition Programme to consider all aspects arising from the transition

and how any arising risks will be mitigated.

11.1 Our Focus

Standard Chartered acknowledges the importance of the transition and is responding with the following:

PUBLIC

12. Next Steps

23

12.1 Next steps for you

We will be engaging with you to support you in your transition to the RFRs, and to progress your preferred remediation options for your

legacy LIBOR contracts. In the interim, below are the recommended actions and next steps to ensure a successful transition.

Where you need more information specific to you, please contact your Relationship Manager or email ibor.transition@sc.com.

Understand the industry

targets on LIBOR product

cessation

You should prepare yourself for potential changes as market participants adhere to

the product specific cessation timelines.

Familiarise yourself with

RFR markets and products

Understand the depth of the RFR markets and how the RFR products function,

paying particular attention to interest calculation methodologies and conventions.

Operational readiness

When your operational systems and processes are ready, take steps to actively

transition away from LIBOR and other relevant IBORs, by starting to transact in RFR

products.

Identify all of your LIBOR

exposures

Understand the extent of your business’ exposure to LIBOR and other relevant

IBORs, review the transactions in your books, and identify the contracts linked to

these rates.

PUBLIC

Below are some key resources and guidance to help support you in relation to your IBOR transition efforts.

Dedicated LIBOR Transition webpage

LIBOR Events webpage on Client Briefing Sessions

‘Checklist for Success’ – Standard Chartered’s LIBOR Transition readiness

checklist

‘LIBOR Transition – What you need to know brochure on the current IBOR

developments

ISDA Benchmark Reform at a Glance and Fallbacks Supplement and Protocol

ARRC’s Recommended Best Practices and Paced Transition Plan

RFRWG’s Priorities and Milestones

LMA’s Glossary of Terms and Guidelines

If you have additional queries on the transition, please reach out to your

respective Standard Chartered point of contact or email

IBOR.Transition@sc.com

13. Resources and Contacts

24

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Appendix

25

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Case 1: A corporate has GBP fixed rate bonds and

entered into multiple fixed to float interest rate swap

contracts to convert the bonds’ interest from fixed to

floating (GBP 3M LIBOR + Spread)

Case 2: An institution invested in a portfolio of GBP fixed

income instruments. In managing the interest rate risk, it

entered into multiple fixed to float interest rate swap

contracts to convert the return of the underlying bonds

from fixed to floating (GBP 3M LIBOR + Spread)

10Y GBP basis swap

(GBP 3M LIBOR vs SONIA)

5Y GBP basis swap

(GBP 3M LIBOR vs SONIA)

3Y GBP basis swap

(GBP 3M LIBOR vs SONIA)

Mitigating Potential Basis Risks on a Floating Rate Portfolio

7. Source: Bloomberg

Appendix 1: Case Study – Mitigating Basis Risk

Problem

▪ The LIBOR discontinuation presents a potential risk of valuation jump in both cases

▪ Depending on the final transition methodology and levels being agreed upon after the transition, the cash flows

and valuation of the swaps are likely to be based on the prevailing SONIA swap curve

Solution

▪ Clients can consider entering into a LIBOR/SONIA basis swap to hedge against the risk of valuation jump

▪ In the past year, the GBP LIBOR-SONIA basis swap curve has flattened across the tenor (Chart) suggesting

spreads are adjusting to historical median. This could be an opportunity to lock in basis and hedge against jump

risk mentioned above

26

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SONIA Compound Rate Formula

Where,

d = No of days in Calculation Period

SONIAi =SONIA rate applicable on business day i

ni = No of days for which SONIA rate applies

Transaction Terms Risk Considerations

▪ Interest is based on fixings computed over the interest period and hence the

interest amount is only known two business days before the payment8

▪ SONIA fixing exposure can be hedged in the swap and futures markets. As

SONIA derivatives are still at a nascent stage, the liquidity of these markets

may be lower and transactional costs may be higher compared to LIBOR

derivatives

Interest Calculation of SONIA Loan

▪ SONIA Compound Rate is calculated based on SONIA rate compounded daily

over the interest period, given that SONIA itself is an overnight rate, while the

interest period is at the Borrower’s option

Example of Interest Amount Calculation▪ Notional of GBP 10 million, interest rate of SONIA Compound Rate + Margin

▪ Illustrative Interest Period is seven days, interest is payable two business days

after the end of Interest Period. Day count convention of Actual/365

▪ Interest amount calculation for one interest period:

Day 1 - Monday

SONIA: 0.72%n:

Day 2 - Tuesday

SONIA: 0.70%n:

Day 3 - Wednesday

SONIA: 0.68%n:

Day 4 - Thursday

SONIA: 0.71%n:

Day 5 - Friday

SONIA: 0.73%n:

Day 6 - Saturday Day 7 - Sunday Day 10 – Wednesday

(Interest Payment

Date)

GBP SONIA Loan

Borrower Corporate A

LenderStandard Chartered Bank (Hong Kong) Limited; or

Standard Chartered Bank (Singapore)Limited

Tenor 5 years

Currency GBP

Interest RateSONIA Compound Rate7 + Margin for the relevant

Interest Period

Interest Period 7 days

Day Count Act/365

Appendix 2A: Case Study – Characteristics of an RFR

Loan

7SONIA Compound Rate is calculated by compounding SONIA daily over the interest period. 8The actual mechanics shall follow the Loan’s terms and conditions. It may be different to standard in SONIA market 27

SONIA Loan

PUBLIC

Appendix 2B: Case Study – Characteristics of an RFR

Floating Rate Note

SONIA Compound Rate Formula

Where,

d = No of days in Calculation Period

SONIAi =SONIA rate applicable on business day i

ni = No of days for which SONIA rate applies

Transaction Terms

Risk Considerations

▪ Coupon is based on fixings computed over the coupon period and hence the

interest amount is only known two business days before the payment9

▪ SONIA fixing exposure can be hedged in the swap and futures markets. As

SONIA derivatives are still at a nascent stage, the liquidity of these markets may

be lower and transactional costs may be higher compared to LIBOR derivatives

Interest Calculation of SONIA Floating Rate Note

▪ SONIA Compound Rate is calculated based on SONIA rate compounded daily

over the coupon period, given that SONIA itself is an overnight rate, while the

coupon period is semi-annually

Example of Interest Amount Calculation▪ Notional of GBP 10 million, interest rate of SONIA Compound Rate +10bps

▪ Coupon period is seven days, interest is payable two business days after the end

of coupon period. Day count convention of Actual/365

▪ Interest Amount calculation for one couponperiod:

Day 1 - Monday

SONIA: 0.72%n:

Day 2 - Tuesday

SONIA: 0.70%n:

Day 3 - Wednesday

SONIA: 0.68%n:

Day 4 - Thursday

SONIA: 0.71%n:

Day 5 - Friday

SONIA: 0.73%n:

Day 6 - Saturday Day 7 - Sunday Day 10 – Wednesday

(Interest Payment

Date)

Description

▪ Short-term FRN denominated in GBP issued by Standard Chartered Bank

(Singapore) Limited (A/A1/A) or Standard Chartered Bank (Hong Kong) Limited

(A+/A1/--)

▪ The floating rate coupon references SONIA, fixed and compoundeddaily, plus

a flat spread. Coupon is paid semi-annually

GBP SONIA Note

IssuerStandard Chartered Bank (Hong Kong) Limited; or

Standard Chartered Bank (Singapore) Limited

Tenor Six months or one year

Currency GBP

Coupon SONIA Compound Rate10+ [ ] bps

Coupon Frequency Semi

Day Count Act/365

Issuer Rating

A+/A1/-- (S&P/Moody’s/Fitch) for Standard

Chartered Bank (Hong Kong) Limited

A/A1/A (S&P/Moody’s/Fitch) for Standard

Chartered Bank (Singapore) Limited

28

SONIA Floating Rate Note

9 The actual mechanics shall follow the Note’s terms andconditions. It may be different to standard in SONIA market10SONIA Compound Rate is calculated by compounding SONIA daily over the coupon period.

PUBLIC

▪ The US based Alternative Reference Rates Committee

▪ The Working Group on Sterling Risk-Free Reference Rates

▪ The Working Group on Euro Risk-Free Rates

▪ The National Working Group on Swiss Franc Reference Rates

▪ Cross-Industry Committee on Japanese Yen Interest Rate Benchmarks

▪ Interest Rate Benchmark Reform in Australia

▪ Canadian Alternative Reference Rate Working Group

▪ The Steering Committee for SOR Transition to SORA

▪ International Swaps and Derivatives Association on Financial Benchmarks

▪ Financial Stability Board's Benchmark publications

▪ International Accounting Standards Board Interest Rate Benchmark Reform

▪ International Capital Market Association's Benchmark Reform

▪ Loan Mortgage Association work on LIBOR

Appendix 3: List of Regulatory and Industry Bodies

29

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Abbreviations

€STR Euro Short-Term Rate IASB International Accounting Standards Board

ARRC Alternative Reference Rates Committee IBOR Interbank Offered Rate

BD Business Day ICMA International Capital Markets Association

BoE Bank of England ICMSA International Capital Market Services Association

BP Basis Points ISDA International Swaps and Derivatives Association

CCP Central Counterparty JPY Japanese Yen

CHF Swiss Franc LCH London Clearing House

CLO Collateralised Loan Obligations LIBOR London Interbank Offered Rate

CME Chicago Mercantile Exchange Group LMA Loan Market Association

ECB European Central Bank LSTA Loan Syndications and Trading Association

EFFR Effective Federal Funds Rate NY New York

EIB European Investment Bank OIS Overnight Index Swap

EIR Effective Interest Rate OSSG Official Sector Steering Group

EMMI European Money Markets Institute PAI Price Aligned Interest

EONIA Euro Overnight Index Average RFR Risk-Free Rate

EU European Union SC-STS Steering Committee for SOR Transition to SORA

EURIBOR Euro Interbank Offered Rate SOFR Secured Overnight Financing Rate

FCA Financial Conduct Authority SONIA Secured Overnight Index Average

FM Financial Markets SORA Singapore Overnight Rate Average

FRBNY Federal Reserve Bank of New York THOR Thai Overnight Repurchase Rate

FRN Floating Rate Note TLREF Turkish Lira Overnight Reference Rate

FSB Financial Stability Board USD United States Dollar

GBP Sterling pounds WG Working Group

30

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Disclaimers

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Disclaimers

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Disclaimers

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