jacqueline loh : act now to transition to sora keynote speech by ms jacqueline loh, deputy managing director of the monetary authority of singapore, at the association of banks in singapore ’ s roundtable session on sgd interest rate landscape changes, singapore, 9 september 2020. * * * 1 good morning to everyone. first, let me thank ai boon and her team in abs1 for organising this roundtable session, and inviting me to speak. it is heartening to see the large number of participants comprising banks, as well as corporates, sme and retail customers joining this virtual session. this reflects the importance of the topic that we ’ re discussing today – the shifts in the interest rate benchmark landscape, and what we must do in preparation. 2 interest rates in singapore are determined by global developments given our exchange rate centred monetary policy framework. against that, robust market - driven interest rate benchmarks, play an important role in the domestic financial system and the broader economy. similar to other economies, interest rate benchmarks reflect the cost of borrowing in underlying markets. they are used widely by – banks, to price loans to individuals and businesses ; financial market participants, in pricing financial products such as bonds, floating rate notes and interest rate swaps ; and corporates, as a discount rate for financial reporting of its assets. 3 in singapore, sibor and sor2 have served as the key interest rate benchmarks in singapore dollar ( sgd ) financial markets for decades. they meet the needs of different user groups, with sor used in pricing of bonds and loans to large institutions with hedging requirements, as sor is also the reference benchmark in sgd derivatives, while sibor is mainly referenced in banking products for smaller corporates and retail customers. changes underway in the sgd interest rate benchmark landscape will therefore, impact all financial market participants in singapore – in your capacities as lenders, borrowers, investors, and savers. a setting the global context 4 central banks and regulatory authorities globally have been undertaking significant and sustained efforts on interest rate benchmark reform for a number of years now. at the global level, the financial stability board ( fsb ) has identified interest rate benchmark transition as a key priority. derivatives market participants are encouraged to shift away from interbank offered rates ( or ibors ) to near risk - free rates ( rfrs ). term unsecured interbank markets that used to underpin ibors, are no longer sufficiently

these, which also has a direct impact on their it. 2. the banking union – a response to the financial market crisis the current financial and sovereign debt crisis has also exposed flaws in the architecture of banking supervision. i would therefore like to highlight four weak points that we have either eliminated or are working towards eliminating on the road to a european banking union. german corporate governance code as approved by the code ’ s government commission on 24 june 2014. bis central bankers ’ speeches 1. consistent european banking supervision banking supervision at the national level was replaced on 4 november 2014 by direct, ecb - led supervision of the largest european banks. under the single supervisory mechanism ( ssm ), all prudential reporting data from significant banks are now collected by a central authority, with information assessed in a manner that allows cross - border comparisons to be drawn. 2. harmonisation of banking supervision the establishment of a uniform prudential framework has brought about greater harmonisation of banking oversight in member states, with regulatory arbitrage being prevented by shifting responsibility for banking supervision and resolution to the european level. 3. liability cascade in the event of resolution one lesson the crisis has taught us is that no bank should be “ too big to fail ” : if the worst comes to the worst, they must be able to fail. the single resolution mechanism ( srm ) defines this usually self - evident liability cascade, according to which shareholders and creditors are first and second in line to absorb any losses. taxpayers are the last link in this chain of liability. 4. capital backing for government bonds on the other hand, high levels of sovereign debt can also destabilise the domestic banking sector – i am referring specifically to the zero risk weighting of government bonds. in future, this vicious circle between sovereign and banking risks could be broken by implementing appropriate measures. after all, we have seen that government bonds are not risk - free. that is why the preferential regulatory treatment afforded to government bonds and other exposures to the public sector, in particular, needs to be brought to an end. the idea behind the banking union is a common financial regulatory framework, known as the single rulebook, and rests on two main pillars. the first pillar is central, joint responsibility for banking supervision under the aegis of the ecb. this has already been put in place in the shape of the ssm. the second pillar is the srm, which is responsible for the recovery and resolution of insolvent banks in times