House of the year, Singapore: OCBC

Asia Risk Awards 2022

Wee Wei Min, OCBC

OCBC Bank has again demonstrated its preeminence among Singapore banks this past year, through leadership in the local interest rate benchmark transition, market-leading ESG (environment, social and governance) investment offerings, and innovative digital solutions for its foreign exchange clients.

At a time when the market was awaiting the outcome of a consultation by the Monetary Authority of Singapore on the adjustment spreads for the transition of legacy swap offered rate (SOR) contracts in the wholesale market, OCBC, together with another commercial bank, completed a 30-year overnight indexed swap (OIS) derivatives transaction in July this year using the Singapore Overnight Rate Average (Sora) as the interest rate benchmark. The bank believes it to be the first long-tenor Sora OIS trade in the city-state.

The biggest challenge, according to Wee Wei Min, global head of sales and structuring, global treasury at OCBC Bank, lies in the long tenor of the transaction because of a dearth of liquidity on that part of the Sora curve. Wee says OCBC overcame this challenge by marrying its corporate and institutional clients to create liquidity.

“OCBC was able to transit a long-dated overnight indexed swap, amortising SOR-based interest rate swap into Sora with our client. OCBC was able to break down the trade into the various tenor buckets against the offsetting flows from our network of clients. This solution worked successfully and sets the precedent in the collaboration process across teams for other long-dated deals to be transited,” she says.

Wee says the fact the bank had senior leaders sitting on the legacy contract conversion sub-committee and the trading sub-committee of the Steering Committee for SOR and Sibor transition to Sora has not only helped the industry make the transition, but also the bank.

OCBC has a long history of leadership in Singapore’s local benchmark transition. In 2019, for instance, OCBC and another commercial bank traded Singapore’s first OIS derivatives transaction using Sora.

OCBC has also executed a number of sustainable finance transactions in the past 12 months, further cementing its title as a frontrunner in the ESG space. One example was a transaction for a real estate investment trust, First REIT. The bank also priced the Housing Development Board’s first green bond and a repeat sustainability-linked issuance for Sembcorp.

“As ESG bonds have a scarcity factor in the Singapore dollar market, we envisioned that investor demand for such instruments will be forthcoming and we lead-managed the market’s first social bond for First REIT, an SGX-listed healthcare-focused REIT. The transaction was aligned with the REIT’s newly established social finance framework, which ties in with the United Nations’ sustainability development goals. In helping these issuers, we created a meaningful platform to further ESG bond issuances, deepening the ESG footprint in the Singapore bond market.”

Like all banks, OCBC is also very much in the throes of its digital journey. One of its key initiatives – FX Online – the bank’s digital FX platform, which was launched in 2020, has seen further improvements in the past year. These improvements have included leveraging machine learning and robotic process automation, as well as deeper cooperation among the departments within the bank, to offer solutions that are directly relevant to clients’ financing needs instead of overwhelming them with information.

By leveraging machine learning and robotic process automation on FX Online, the bank is able to prompt its customers while on the go about FX exposures that need to be managed through its Business Mobile Banking app.

“We are not going to sit and tell them that this is only for a certain kind of deals. Our game, perhaps the end state could be that as long as you want to hedge or invest, you can do so regardless of the channels and where you are. You could be at the airport waiting to catch a plane, and when prompted by OCBC that this is the best time to hedge your Singapore dollar exposure, you are able to do so,” says Gerard Tan, managing director and head of digital market strategy, global treasury at OCBC.

The bank’s strategy in offering solutions that seek to add value is also palpable in the market insight it provides its clients for their currency needs. Tan says the bank seeks to ensure the information it provides is relevant to clients and offers advisory on how best to capture opportunities and market dislocation rather than overloading them with information.