The Johannesburg Interbank Average Rate (JIBAR) – one of the most widely used interest rate benchmarks by banks in South Africa – will be replaced by an Alternative Reference Rate (ARR). The Market Practitioner’s Group (MPG) has designated the South African Rand Overnight Index Average interest rate benchmark, or ZARONIA, as the successor rate to replace Jibar.
RMB said yesterday that it has launched a South African Rates Reform Programme to help clients navigate the many challenges resulting from the transition. As part of this drive to assist the market with the transition, RMB has developed the first ZARONIA Calculator.
Kim Robertson from RMB said, “On 3 November 2023 the SARB announced that the observation of ZARONIA had come to an end and that the rate, now endorsed, could be used by market participants. Our team set about understanding the complex calculations for the ZARONIA rate and have now made a simple solution available for anyone to use, via our website at rmb.co.za. We hope this will make the transition to the ZARONIA much easier for the market.”
Adopting the new ARR will impact a range of transactions and products. Corporates could expect to be affected if they have a floating rate loan, credit facility, deposit, derivative or any financial contract that has or may have payments linked to JIBAR (or other affected benchmarks) that mature after the JIBAR cessation date.
Robertson said, “We are assessing how the transition may impact JIBAR-linked transactions and products, while we are preparing to review and enhance our product offering. We are closely monitoring market developments during this process and benchmarking against the transitions of our global peers during our journey towards reference rate reform.
“In the meantime, we suggest that companies review transactions they have that are based on JIBAR and other reference rates, consider the potential impact that the discontinuation of JIBAR and other reference rates will have, and consider the impact that the transition to an ARR may have on their business. They also need to start learning about the ZARONIA and how it will work for their transactions,” she said.
BUSINESS REPORT