KBank and CIMB Thai Bank completed the first overnight indexed swap derivatives transaction referencing Thailand’s new reference rate on Monday.
KBank and CIMB Thai Bank on Monday (31 August) completed the first overnight indexed swap derivatives transaction referencing THOR (Thai Overnight Repurchase Rate), Thailand’s new reference rate.
In 2019, the BOT (Bank of Thailand), with inputs from the TBA (Thai Bankers’ Association) and the Association of International Banks, established a Steering Committee on Commercial Banks’ Preparedness on LIBOR Discontinuation.
The Committee was tasked with proposing the replacement rate for THBFIX, which is widely used in the Thai financial market but it put at risk by the discontinuation of LIBOR at the end of 2021.
THOR was finalised as the replacement rate in April. The rate is calculated from actual overnight interbank transactions in the private repurchase market.
KBank, Thailand’s largest lender by assets, executed the first indexed swap derivatives transaction with bespoke THOR mechanisms and configuration facilitated by Murex.
“The interest rate swap transaction based on THOR represents a critical inaugural step—it sets the stage for new markets for THOR-linked derivatives and cash products,” Murex said in a statement.
The transaction was arranged by the Bangkok unit of global interdealer broker Compagnie Financiere Tradition.
“This is a remarkable moment and an important milestone for KBank history and the local financial community to create a robust interest rate derivatives market based on THOR,” said KBank Capital Markets Business Division Head Thiti Tantikulanan.
“Close collaboration with various stakeholders in Thailand, including the Bank of Thailand and the Murex teams, will contribute to the development of a liquid derivatives market based on the new benchmark rate after the LIBOR discontinuation at the end of 2021.”