SIBOR (Singapore Interbank Offered Rate): A benchmark interest rate at which banks lend to each other. It reflects the cost of borrowing Singapore dollars in the interbank market and serves as a key reference for various financial products, including home loans.
Association of Banks in Singapore (ABS): A consortium of banks that oversees the determination of SIBOR, among other financial standards in Singapore. ABS collects daily submissions from member banks to calculate SIBOR.
Tenures: SIBOR rates come in several tenures, including 1-month, 3-month, 6-month, and 12-month, indicating the period over which the borrowing rate is calculated.
Calculation: SIBOR is derived from the average interest rates submitted by a panel of banks, after removing the highest and lowest quartiles, ensuring a balanced representation of the market’s borrowing costs.
SIBOR vs. SORA (Singapore Overnight Rate Average): SORA is emerging as the new benchmark interest rate, calculated as the volume-weighted average rate of overnight interbank transactions. It’s considered more transparent and based on actual transactions compared to SIBOR.
Transition to SORA: The shift from SIBOR to SORA is part of a global trend towards using transaction-based benchmarks for more accurate and transparent interest rate indications. Financial institutions are adapting by offering SORA-pegged loan products.
Impact on Borrowers: Loans previously pegged to SIBOR may transition to SORA or other benchmark rates. Borrowers should consult their financial institutions for options and implications on existing or new loans.
This glossary provides a concise overview of SIBOR, highlighting its role, calculation method, and the ongoing transition to SORA within Singapore’s financial landscape.