RISK MANAGEMENT | 20 March 2025

JIBAR Reform:
CAS Announcement

Absa | Corporate and Investment Banking > Insights and Events > JIBAR Reform
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JIBAR REFORM: Absa supports the SARB’s endorsement of the CAS1 methodology in moving forward with the transition to ZARONIA.

The SARB’s Market Practitioners Group has endorsed that the South African interest rate market adopts a Credit Adjustment Spread (CAS) estimation methodology, consistent with international practices and based on ISDA’s2recommendation.

This endorsement represents a crucial milestone in the transition from JIBAR to ZARONIA, an initiative aligned with global efforts to improve the transparency and credibility of financial benchmarks, and to ensure a more robust and trustworthy financial system.

Absa strongly supports the announcement from the SARB.

1. What is the CAS?

JIBAR embeds a term and credit premium within each fixing, while ZARONIA is a secured overnight rate – and therefore does not materially embed either. Consequently, when transitioning a contract from JIBAR to ZARONIA, an adjustment spread is required to minimise any economic impact or value transfer between counterparties.

The ISDA methodology, using the median spread between tenor equivalent rates over a five-year historical observation period, provides a fair and transparent basis for the CAS calculation. The same methodology has been applied to other rates such as LIBOR3, as they transitioned to alternative risk-free rates.

Please note the following:

  • The CAS is only relevant for existing contracts that need to transition away from JIBAR when the rate is no longer available for use.
  • The actual CAS value will only be finalised, based on the endorsed methodology, once the JIBAR cessation announcement is made by the SARB, currently expected in December 2026.
  • The CAS values per tenor fixing will be industry wide and therefore not institution specific.

2. Why is the SARB’s endorsement significant?

The SARB’s endorsement is a significant milestone in the transition process, as it establishes an industry wide methodology for transitioning contracts in South Africa.

Financial market participants can get comfort that the transition for existing contracts will be done using a consistent, fair and regulatory endorsed methodology.

3. What’s next?

We have developed an extensive client engagement strategy to keep our clients updated as more crucial milestones are achieved. Related, we invite you to try out and experience Absa’s ZARONIA calculator on our website, which can be used to compute interest and interest payments for ZARONIA-linked financial products for both single and multi-period instruments. We believe this innovative tool will help our clients understand the workings of ZARONIA and facilitate the industry-wide adoption of ZARONIA. Please reach out to your relationship manager should you have any further questions.

[1] Credit Adjustment Spread
[2] The International Swaps and Derivatives Association
[3] London Interbank Offered Rate

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