A steering committee has been set up to oversee a major change in the benchmark interest rate.

The committee will be chaired by OCBC Bank chief executive Samuel Tsien and comprise senior representatives from key banks, industry associations and the Monetary Authority of Singapore (MAS).

It will manage a move from the Singapore dollar Swap Offer Rate (SOR) to the Singapore Overnight Rate Average (Sora).

The change will occur over the next two years and comes on the back of a likely discontinuation of the London Interbank Offered Rate (Libor).

SOR is a key benchmark used to price Singapore dollar interest rate derivatives, commercial and retail loans and other financial products. The three-month SOR is used to price corporate loans.

Some mortgages are still pegged to the SOR but most use the Sibor (Singapore Interbank Offered Rate).

The likely discontinuation of the United States dollar Libor will impact the sustainability of SOR, said the Association of Banks in Singapore (ABS) and the Singapore Foreign Exchange Market Committee.

They have concluded that financial contracts that reference the SOR, particularly Singdollar interest rate derivatives, should move to the Sora, the MAS said yesterday.

The Sora is seen as a sound alternative, given its long use here and robust structure in financial markets.

The transition will be phased in over the next two years.

"As the transition involves many industry participants, as well as commercial and retail customers, it is critical to have adequate stakeholder engagement and a well-managed transition," the MAS said.

The steering committee overseeing the transition will provide direction on industry proposals to develop new products and markets based on the Sora, and to engage with stakeholders to seek feedback and raise awareness on issues related to the transition, the MAS said.

• Inquiries can be sent to the ABS at SORTransition@abs.org.sg or call 6224-4300.