SINGAPORE (THE BUSINESS TIMES) - DBS announced on Monday (May 10) that it has issued more than $450 million in Singapore Overnight Rate Average (Sora)-pegged loans as at end-April 2021, just over six months after the bank launched the market's first Sora-pegged business property loan.

The strong traction for loans which reference the Sora comes after Singapore's ceasing of the issuance of new loan products referencing the Swap Offer Rate (SOR) at the end of last month.

Sora-pegged loans now account for about one-third of all new small and medium enterprise (SME) loans in Singapore issued by DBS, which signals a "positive sign" for Singapore's transition towards Sora as its main interest rate benchmark, the bank said.

DBS group head of SME banking Joyce Tee noted that it was important SMEs are not left behind even as the financial industry progresses with the transition to a Sora-centred Singapore dollar interest rate market.

"SMEs form a significant cornerstone of Singapore's economy, and are critical to ensuring an orderly transition to the new interest rate benchmark," she added.

With the impending discontinuation of interest rate benchmarks such as the London Interbank Offered Rate, DBS said it has been partnering its clients to achieve a seamless transition to alternative Risk-Free Benchmark Rates.

Risk-Free Benchmark Rates are typically derived from overnight deposit rates, based on a large number of observable transactions.

All financial institutions will cease to offer new loan products referencing the SOR by end-April. Further, the Singapore Interbank Offered Rate will cease to be used in new loan products by end-September this year.