DBS has completed Singapore’s first export financing transaction referencing the USD secured overnight financing rate (SOFR) with Bunge, a global food and agri-business company. This US$25 million transaction, priced off SOFR averages, is a significant industry milestone as the global interbank offered rate (IBOR) transition gathers pace, and it fortifies Singapore’s status as a global trade hub.
Such transactions enable the bank's institutional clients to transition their trade financing instruments away from USD London interbank offered rate (LIBOR) as a reference rate, ahead of the December 2021 cessation guidance issued by the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation.
Tan Su Shan, group head of institutional banking, DBS, noted that with LIBOR’s impending discontinuation, the bank has been actively engaging its institutional clients to ensure a smooth transition to alternative risk-free benchmark rates. This includes partnering corporates plugged into the international trade system to develop suitable trade financing solutions that reference new USD-pegged benchmarks.
“The global IBOR transition is a hugely complex endeavour,” Tan says. “We are pleased to partner forward-looking companies such as Bunge in pioneering trade financing instruments that are a fit for the new interest rate benchmark landscape. In doing so, we are entrenching Singapore’s position as a trusted and reliable trade nexus that is well prepared for the broader changes taking place in the financial markets.”