Execution needs to be well-sequenced and tightly coordinated. I would like to share three key pillars that can support a smooth transition: Preparing early at the individual firm-level Coordinating well at the industry-level Communicating clearly and effectively at the customer-level 16 First, at the individual firm-level, both banks and corporates must be ready to carry out this transition. This includes identifying risk exposures, putting in place appropriate contractual fallbacks, ensuring systems readiness, understanding the features of new SORA products, and ultimately, transacting in these products. Indeed, we have seen some early wins. MAS is encouraged by the success of our three local banks in completing SORA commercial loans9 with early adopters such as CapitaLand and Wilmar. We are also heartened that OCBC had launched a retail mortgage loan, while DBS had launched a business property loan, both referencing the compounded SORA rates published by MAS. Riding on these successful  pilots, we hope to see more banks start originating new SORA loans across the broader industry. Against this, MAS will be stepping up supervisory engagement to ensure banks are well prepared for the transition. MAS had conveyed its supervisory expectation of banks through a regulatory survey conducted earlier in the year, on the progress of banks’ preparations for the transition. This engagement will continue and will include elements such as systems readiness, legacy transition plans, and pace of adherence to industry guidance established by the SC-STS.
But this transition period will be part of the second phase of the negotiations and there will be no certainty about it until at least this autumn. Up to now, the EU and the UK are following different strategies and even use a different wording to refer to this transition period, “implementation period” being the term used by the UK. More specifically, the UK has welcomed the agreement on the transition period and has sent out the message that nothing will change up to the end of the “implementation period”. Further, to transmit certainty to institutions operating in the UK, it has committed to bring forward legislation, if necessary, to create temporary permissions in the “unlikely” event that the withdrawal agreement is not ratified. The EU has a more prudent stance and recalls that nothing is agreed until everything is agreed. In fact, legal certainty will only come with the ratification of the Withdrawal Agreement by all sides involved in the negotiations. In this context of uncertainty, within the SSM framework, banks are considered to be responsible for taking the necessary steps to obtain all authorisations required for them to carry out their activities in a timely manner to make sure that they can continue to serve their customers after 30 March 2019. They are expected to present credible Brexit plans and to use the possible transition period to implement their plans, not to delay planning. It is acknowledged that adapting to a scenario where the UK becomes a third country is challenging.