FAQs

JIBAR is an acronym for the Johannesburg Interbank Average Rate (JIBAR). It is one of the most widely used interest rate benchmarks in South Africa. It is published by the SARB daily in a number of different tenors based on submissions from participant banks (Panel Banks).

The calculation of a South African reference rate started in the 1990s with the South African Futures Exchange (Safex) Bank Bill rate. The current reference rate system was established in 1999. From 1999 to November 2012, the acronym referred to the Johannesburg Interbank Agreed Rate, and from November 2012 it was changed to the Johannesburg Interbank Average Rate.

After the 2008 financial crisis, authorities in the US, EU, Japan and the UK discovered that traders had colluded to manipulate and rig the (LIBOR) rates to make a profit at clients and counterparts’ expense. This discovery led to numerous reviews and reports by national and international organisations that fully uncovered the scandal in 2012. In 2017, the UK’s Financial Conduct Authority (FCA) announced that they will no longer compel banks to submit rates for the calculation of LIBOR (post-2021). This propelled a global shift away from the use of Interbank Offered Rates (IBORs). In response, the Prudential Authority released a paper in 2018, detailing their proposal to transform the interest rate benchmarks and reference rates in South Africa.

The case for moving away from LIBOR as a reference rate is powerful. The previously experienced LIBOR determination problems made many banks nervous of being involved in LIBOR’s publication reputationally. The interbank lending and borrowing market have become less important since the financial crisis, because new rules encourage banks to use other forms of borrowing. That means there are fewer transactions on which to base the rate.

One of the crucial improvements suggested in these reports is that LIBOR submissions should be anchored, to the greatest extent possible, to actual transactions and their associated costs of financing. Despite enhancements to LIBOR, the benchmark isn’t particularly transparent or robust and the rate-setting process hinges on interbank funding transactions that are declining in volume.

There is a strong likelihood that JIBAR, SABOR, SAFEX and STeFI will cease to exist at some point in 2026. This date is yet to be confirmed by the SARB.

The JIBAR transition is a market driven event, not a regulator compelled event. The regulator and central bank are not abolishing JIBAR and will not be defining how the JIBAR transition should take place. Instead, they are collaborating with the industry, including trade associations, in mapping a way forward.

The Alternative Reference Rate (ARR) that has been recommended to replace the current JIBAR rate is ZARONIA (South African Rand Overnight Index Average).

ARRs are structured differently to the JIBAR rate, which will mean complexity for impacted companies. For example, JIBAR is typically a forward-looking rate with a 1-, 3-, 6- or 12-month tenor that implicitly includes bank credit risk, while ZARONIA is a backward-looking overnight unsecured rate.

As regulators and central banks are not defining how the transition should take place, just when, companies will need to determine operational changes and follow their strategies and timelines to facilitate completing the transition.

The transition from JIBAR and other reference rates is expected to impact both existing and future transactions, particularly in derivatives, bonds, structured products, securitised products, loans and mortgages, as well as other products and contract types that reference JIBAR and other reference rates.

RMB believes that an internationally recognised and sustainable benchmark solution is vital for an efficient financial market. We therefore support the market transition from JIBAR and other reference rates. We are actively involved in industry discussions and we are contributing to the industry dialogue with regulators, central banks and industry bodies, aiming to achieve continuity for benchmark-based products, continued financial market resilience and good outcomes for our clients.

We have undertaken an impact study on how JIBAR and the other rates discontinuation will affect our business and clients. We are working through internal steps and processes to balance benchmark transitioning with our obligations. We have also set up a South African Reference Rates Reform governance and implementation programme. We remain focused on identifying and addressing the transition impact to our clients, operational capabilities and financial contracts, among others.

There is a strong likelihood that JIBAR, SABOR, SAFEX and STeFI will cease to exist at some point in 2026. This date is yet to be confirmed by the SARB. The industry timeline can be found on the SARB website: https://www.resbank.co.za/en/home/what-we-do/financial-markets/financial-markets-market-practitioners-group.

RMB is currently analysing JIBAR-impacted client contracts and assessing amendment provisions contained within these documents. We encourage our clients to undertake a similar analysis and review exercise, and to take appropriate independent professional advice (legal, tax, accounting, financial or other) so that they can understand the impact of the discontinuation of JIBAR or the other reference rates on their portfolios with RMB and their business more generally.

This will be determined on a per contract basis and depends on the financial product and the existing fallback language used. Clients should review their documentation carefully and seek independent professional advice (legal, tax, accounting, financial or other) as appropriate when considering whether a transition to ARRs is best achieved. This could potentially be done by amending the contract, either bilaterally or by participating in a market initiative (for example by adhering to relevant ISDA protocols), or replacing the product with a financial product that references the preferred ARR. The amendment process is likely to be different for each product type and is best discussed with RMB Relationship Managers.

We encourage clients to keep up to date with the latest industry developments in relation to benchmark transitioning (e.g., monitoring the announcements of industry working groups and international bodies and the relevant product groups). Clients should also consider the impact on their business, using independent professional advisers (legal, tax, accounting, financial or other) as appropriate.

We encourage our clients to follow the progress of product offerings referencing ARRs and assess whether they may be suitable for them.

In this context, ‘fallback language’ refers to the legal provisions in a contract that apply if the underlying reference rate of the product (e.g., JIBAR) is permanently discontinued or ceases to be available. Fallback will generally consist of two components:

• The trigger event: an event that brings about the need to use the fallback (such as the JIBAR rate not being available); and
• The fallback rate: the rate, or approach to determining the rate, which is to be used in place of the relevant JIBAR rate that is unavailable.

There are a range of market standard fallbacks for different rates as applied to various financial products. Clients should review their documentation closely to determine the position for each contract in their portfolios, in relation to existing or legacy products, as well as for any new products they are considering entering into.

Various industry groups have started to provide template fallback language for new products and are working closely with market participants to develop an amendment process for legacy products so that this fallback language can be applied retrospectively. In some cases amended fallback language will be incorporated with reference to other documentation for example, with ISDA derivative contracts and the application of ISDA definitions. ISDA supplements would amend the definitions in applicable new transactions entered into from the date of the relevant ISDA supplement (unless otherwise agreed between the parties), ISDA protocols would amend the definitions retrospectively to apply to existing documentation.

Fallback provisions in the 2006 ISDA Definitions (which are standard terms often incorporated into interest rate derivatives) were drafted primarily for a temporary cessation of an IBOR (e.g., many ISDA definitions require quotes to be obtained from certain reference banks if the applicable reference rate is not available). As a result, it is currently difficult to predict what rate would be paid under existing derivative contracts after a permanent cessation of JIBAR referenced by the contract.

The definitions for ZARONIA have been put into the ISDA Definitions in 2023, but the fallback language will probably only go in around November 2024. ISDA is discussing the requirements for South African Reference Rates Reform with the MPG Legal Workstream, following which they will undertake work to implement more robust fallback language for JIBAR.

On the basis of the work proposed to the ISDA Fallbacks and Protocols, RMB intends to

1. incorporate the new ISDA Fallbacks into our new derivative contracts and
2. to adhere to the Protocols and apply JIBAR fallback language to existing derivative contracts (in each case when the ISDA Fallbacks and the Protocols become available). We encourage clients to familiarise themselves with the new RFR fallback language once it has been developed as part of this process and consider the suitability of the proposed Protocols in respect of their existing transactions. Clients should consider seeking independent professional advice (legal, tax, accounting, financial or other) as appropriate.

RMB recognises the benefits to clients and the market with regard to a transition from JIBAR and other reference rates to RFRs where appropriate. Market participants engaged in this transitioning process would want to create as much liquidity in the RFR market as possible. In this context, RMB is a liquidity provider in new and existing RFRs for derivatives transactions and intends to consider its use of JIBAR and other reference rates versus RFRs in derivatives and, where appropriate:

1. to follow market initiatives as proposed by ISDA to apply compounded RFR and adjustment spreads to its existing derivatives contracts;
2. decide how it can best apply RFRs to new derivatives trades; and
3. consider any proposed adjustment payments that which could be made following a transition between different rates.

Clients should consider this issue based on their portfolios and whether:

1. such portfolio includes cash and derivative products which are both linked to JIBAR and other reference rates terms; and
2. if there is any mismatch between fallback language applicable for each product.

Clients should consider seeking independent professional advice (legal, tax, accounting, financial or other) as appropriate.

RMB is reviewing the industry approach in respect of a range of benchmark rates and financial products and is developing its strategy as the market develops in respect of this issue. In relation to legacy derivative contracts, RMB adheres to the ISDA Protocols as and when they become available.

In relation to legacy cash products, this will be on a product by product basis, some requiring bilateral agreement.

The ISDA Benchmarks Supplement (the Benchmarks Supplement) was published by ISDA in September 2018 primarily to address certain benchmark requirements under the European Benchmarks Regulation (EU BMR). It allows parties to include, in respect of certain derivative contracts, the actions they would take if a referenced benchmark materially changes or ceases to be provided, including the nomination of alternative benchmarks where feasible and appropriate. These actions to be taken, or fallbacks, are provided in the Benchmarks Supplement and can be applied to derivative transactions which reference benchmarks and incorporate one or more of the following definitional booklets (the covered definitional booklets): 2006 ISDA Definitions; 2002 ISDA Equity Derivatives Definitions; 1998 FX and Currency Option Definitions; and 2005 ISDA Commodity Definitions.

Clients who are subject to the benchmark user requirements under the EU BMR should take note that the Benchmarks Supplement is designed to facilitate compliance with these requirements in relation to transactions incorporating the covered definitional booklets.

Incorporating the Benchmarks Supplement may also enable one to apply IOSCO’s recommended practices on the use of benchmarks.

The EU BMR is a piece of European legislation passed to ensure the accuracy and integrity of benchmarks produced and used in the EU. It came into force on 30 June 2016, with most provisions applying from 1 January 2018.

One of the aspects of the EU BMR is that it imposes obligations on ‘supervised entities’ that use a benchmark within the EU, including banks, insurers, central counterparties (CCPs), certain pension funds and others. It requires those entities to produce and maintain robust written plans using ‘fallback’ language to set out the actions they would take if a referenced benchmark materially changes or ceases to be provided, including the nomination of alternative benchmarks where feasible and appropriate. This fallback language must be reflected in the contractual relationship between ‘supervised entities’ and their clients.

The EU BMR also prohibits ‘supervised entities' from using a benchmark in the EU, unless the administrator of the benchmark (or the benchmark itself) is included on a specific register maintained by the European Securities and Markets Authority (ESMA) and provides that fallback language must also apply in certain circumstances where authorisation or approval of a benchmark administrator is withdrawn.

When used in combination with the covered definitional booklets, the Benchmarks Supplement incorporates and applies fallback language if:

• A benchmark ceases to be provided; or
• A benchmark or its administrator is not authorised (or similarly approved); or
• A benchmark is included in an official register (including where such authorisation or inclusion is suspended or withdrawn) in accordance with applicable law

These events are also referred to as ‘trigger events’ within the fallback language. The Benchmarks Supplement also contains acknowledgements regarding the consequences of a change to a benchmark. These acknowledgements provide that, following a change to a benchmark, references to that benchmark will be to that benchmark as changed.

Given that some of the covered definitional booklets already contain fallback language which applies upon the occurrence of some of these trigger events, the amendments which would be made by incorporating the Benchmarks Supplement into the terms of a transaction vary from booklet to booklet.

The Benchmarks Supplement can be incorporated into transactions by parties:

• Adhering to the ISDA 2018 Benchmarks Supplement Protocol (the BMS Protocol) and exchanging questionnaires; or
• Agreeing to its application bilaterally

The BMS Protocol consists of industry-standard documentation published by ISDA, which market participants can use to:

1. incorporate the terms of the Benchmarks Supplement into new transactions, or new and legacy transactions, under existing master agreements; and
2. comply with the EU BMR benchmark user requirements.

RMB has adhered to the BMS Protocol and exchanging questionnaires with counterparties on ISDA Amend, where possible, in order that new transactions with clients under existing master agreements have robust fallback language. As a result of the additional bilateral delivery requirements associated with adhering to the BMS Protocol, ISDA, together with IHS Markit, have developed a technology based solution on the ISDA Amend platform which allows adhering parties to share submitted data to permissioned counterparties. Alternatively, RMB will agree with clients bilaterally on how to apply the Benchmarks Supplement to those transactions.

It is not possible to specify that only certain covered definitional booklets will be covered by the terms of the BMS Protocol. This means that as part of the BMS Protocol adherence method, RMB also intends to implement the Benchmarks Supplement in its entirety.

Benchmark fallback language provided by these two ISDA workstreams interacts in a number of ways. Some of the key similarities and differences are: Both are triggered following the permanent cessation of the relevant IBOR or benchmark, although the Benchmark Supplement fallback language would also be triggered if the benchmark administrator is not authorised or if the use of a benchmark in a relevant jurisdiction under applicable law or qualification is suspended or withdrawn.

• With ISDA’s Fallbacks it is applying a specific RFR, plus a spread, whereas the Benchmark Supplement offers parties a list of more generic fallback alternatives, including ‘agreement between the parties’; and
• The scope of application of the Benchmarks Supplement covers a broader range of benchmarks than the ISDA Fallbacks, which implement robust fallback language for specific IBORs only

As a result, the Benchmarks Supplement covers a wide range of benchmarks, including IBORs. During the period before the ISDA IBOR Fallbacks or IBOR Protocols become effective, parties would still be able to apply interim fallback arrangements to their new IBOR-based transactions using the Benchmarks Supplement.

If ISDA’s IBOR fallback language is incorporated into a transaction alongside the terms of the Benchmarks Supplement, the IBOR fallback language would take precedence in the event that a key IBOR is permanently discontinued or ceases to be available. The generic fallback language in the Benchmarks Supplement will, however, apply if its wider trigger events occur which would not trigger the application of IBOR fallback language.