Row rect Shape Decorative svg added to bottom From JIBAR to ZARONIA. Embracing a new era in South African financial benchmarking Tailored Advice(opens in new tab) Absa | Corporate and Investment Banking > Insights and Events > Zaronia Benchmark Reform South Africa’s financial realm is undergoing a significant shift from the Johannesburg Interbank Average Rate (JIBAR) to the South African Overnight Index Average (ZARONIA). This transition is part of a broader global initiative to reform benchmark rates, echoing the recent phasing out of other Interbank Offered Rates (IBOR) such as the London Interbank Offered Rate (LIBOR) and the Euro Overnight Index Average (EONIA). To view the ZARONIA transition timelines specific to the South African market, please click here. What is Benchmark Reform and why is it needed? Benchmark Reform is a global initiative to enhance the stability and reliability of benchmark rates that underpin financial transactions. The initiative is aimed at improving the transparency and strengthening the credibility of existing benchmarks, such as JIBAR (and the other phased-out IBOR that were replaced with various risk-free overnight indices), to ensure a more robust and trustworthy financial system. The International Organization of Securities Commissions (IOSCO) have specified principles that allow for greater confidence in setting rates. "Risk free" rates have been identified as alternative rates. Absa's ZARONIA calculator The Absa ZARONIA calculator is available for use here. For detailed information on the construction of the ZARONIA rate and its distinctions from JIBAR, please click here to access more comprehensive insights. Try the ZARONIA calculator(opens in new tab) LIBOR and JIBAR were identified as non-compliant with IOSCO principles. The LIBOR transition to "risk free" rates has since been concluded. South Africa is now preparing for the same reform coordinated through the SARB's establishment of a Market Practitioners' Group (MPG). JIBAR is expected to cease December 2026 and will be replaced with ZARONIA. What is the Absa ZARONIA calculator The ZARONIA calculator computes interest and interest payments for ZARONIA-linked financial products, for both single and multi-period instruments. What products can the calculator be used for? The calculator applies conventions for loans, money market funds, bonds and derivatives as endorsed by the SARB, but also allows for some flexibility. 1. Although conventions have been endorsed by the SARB, they are not prescriptive. What should the calculator be used for? By leveraging our deep regional knowledge – and our advisory, financing and capital raising expertise – our award-winning global team will tailor an ideal solution for your needs. Frequently Asked Questions JIBAR vs ZARONIA What is the difference between JIBAR and ZARONIA?ExpandThe key difference between these rates lies in their calculation methodologies JIBAR is forward-looking and relies on submissions of indicative pricing from a selected panel of banks. In contrast, ZARONIA is backward-looking and reflects actual observable transactions of commercial banks, which is why it is considered more credible and robust. JIBAR embeds a credit premium (counterparty credit risk) and term premium and is available in terms 1M, 3M, 6M, 12M while ZARONIA is an overnight rate and does not include a credit or term premium. ZARONIA as a near risk-free rate is consistently lower than JIBAR which contains bank credit as well as a term premium. What is the difference between overnight and term ratesExpandOvernight rates reset daily. Term rates are generally fixed for a specific tenor (e.g., 1M, 3M, 6M, 12M), therefore, these rates are fixed upfront on the reset date. Timelines When will JIBAR cease?ExpandThe SARB (which is the administrator of the benchmark), through the Market Practitioners Group’s Transition Planning and Coordination workstream, has communicated that JIBAR is expected to cease on 31 December 2026 When do I need to stop doing JIBAR deals?ExpandNo New JIBAR Joint communication issued by the SARB and FSCA prohibits further JIBAR trading from 01 May 2026 unless such trading meets the specific regulatory exceptions and dispensations. Absa is adhering to these regulations Can I still do JIBAR deals? If so, is there anything I need to be aware of?ExpandYes, provided that such deals meet the regulatory exceptions and dispensations and the legal agreement has fallback language embedded to address JIBAR cessation on 31 December 2026. Absa has aligned with guidance issued by The Loan Markets Association (LMA) and International Swaps and Derivatives Association (ISDA) Pricing and Valuation How can I check if the amount I am being charged for interest is correct?ExpandAbsa has a ZARONIA calculator that can be used to calculate and validate interest amounts incurred over the most recent interest period in agreements for JIBAR. The calculator is available for use on Absa’s CIB webpage Is there an option to move to another rate other than ZARONIA?ExpandAbsa offers a range of alternative rates to clients. You are encouraged to discuss options available with your Relationship Banker and to seek independent advice on understanding what rates are most appropriate for your profile Is there a forward-looking term rate similar to JIBAR?ExpandTo date no recommendations have been made on the development of a forward-looking term rate. Absa is monitoring MPG developments pertaining to term-rates Accounting and Tax considerations How will basis risk be managed if products have differing lookback periods?ExpandThe MPG have provided lookback conventions for different instrument types. These conventions are aligned to market practice. However, these conventions are not prescriptive. The economics of a hedge instrument could be structured to align to the underlying loan (i.e. lookback period of a hedge should be structured to match underlying loans). What are the considerations for hedge accounting?ExpandThe MPG is in the process of developing an Accounting Guidance note and Tax Interpretation note which will include inputs from SAICA (South African Institute of Chartered Accountants) and SARS (South African Revenue Services) Remediation Do all facilities need to be remediated at the same time?ExpandNo, facilities may be remediated at different times. However, we encourage you to reach out to your Relationship Banker to understand your specific circumstances around the transition. For example, where there is a loan facility and an accompanying hedge, it may be better to transition these at the same time. How will the rate switch work for contracts with updated fallback language and when will the switch take effect?ExpandFor JIBAR linked contracts with updated fallback language, the interest calculation will automatically migrate from JIBAR to ZARONIA upon the JIBAR cessation date (i.e., the trigger event). What is Fallback language? ExpandFallback language refers to the contractual provisions that lay out the process through which a replacement rate can be identified if a benchmark (e.g. JIBAR) becomes unavailable. What will happen if my contracts do not contain fallback language when JIBAR ceases?ExpandIt is important that financial contracts include adequate and robust fallback language to address the cessation of JIBAR. A lack of adequate fallback language may result in the contract referencing the last published JIBAR (effectively converting it to a fixed rate deal). What happens if my contract matures after cessation?ExpandIn this event, Absa will contact you to amend the document and replace the JIBAR rate with an agreed suitable alternative reference rate (likely ZARONIA). If applicable, an appropriate adjustment margin will be made to cater for the differences between the old rate and the new alternative rate such that the contract remains economically equivalent. What is the Credit Adjustment Spread (CAS)?ExpandAn adjustment margin applied to ZARONIA to cater for differences between the old rate (i.e., JIBAR) and the new alternative rate (i.e., ZARONIA) such that the contract remains economically equivalent. Related articles Unlocking your potential with insight and sustainable solutions. RISK MANAGEMENT No New JIBAR Prohibition With nine months remaining until the formal cessation of the Johannesburg Interbank Average Rate (JIBAR) on 31 December 2026, the South African Reserve Bank Prudential Authority (SARB PA) and the Financial Sector Conduct Authority (FSCA), together “the Authorities”, have issued a joint communication instructing financial institutions to stop initiating new JIBAR-linked transactions, products and exposures from 1 May 2026. Read more RISK MANAGEMENT JIBAR Reform 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’s recommendation. Read more RISK MANAGEMENT Benchmark Reform | Assistance with publications On 29 November 2024, the Market Practitioners Group published three significant consultation papers, based on the recommendations of various working groups. The Read more
