Frequently Asked Questions
The highly publicized irregularities relating to the production of interbank offered rates (IBORs) in 2012 prompted a global regulatory response to reform major interest rate benchmarks. The use of IBORs within financial markets has subsequently reduced substantially in favor of more robust alternative reference rates (ARRs), namely overnight reference rates (ONRRs) that are near risk-free.
South Africa has also embarked on a transition journey with the release of a consultative paper prepared by the South African Reserve Bank (SARB) in 2018, detailing its initial proposal to reform domestic benchmark and reference rates. The SARB subsequently formed the Market Practitioners Group (MPG) in 2019 to manage the process of adoption and transition to a new overnight interest rate, the South African Rand Overnight Index Average (ZARONIA).
The SARB’s MPG is a joint public and private sector body, comprising representatives from the SARB, the Financial Sector Conduct Authority (FSCA), and senior professionals from a variety of institutions from different market interest groups active in the domestic capital market.
This transition affects the South African rand (ZAR) bond, loan, and derivative markets. The formal announcement of the cessation of JIBAR was made on December 3, 2025. Key dates were announced:
- The MPG confirmed that rates for all JIBAR tenors will either cease to be provided by any administrator or will no longer be representative immediately after December 31, 2026.
- The next key milestone is the “No New JIBAR” date of March 31, 2026. From this date, no new JIBAR-linked contracts may be issued.
The MPG recommended and the SARB has endorsed ZARONIA as the successor rate to JIBAR. ZARONIA reflects the backward-looking interest rate at which rand denominated overnight unsecured wholesale funds are obtained by commercial banks. It is based on actual transactions and calculated as a trimmed, volume-weighted mean of interest rates paid on eligible unsecured overnight deposits. ZARONIA is published by the SARB on every South African business day.
ZARONIA is based on unsecured overnight call deposits placed with commercial banks, which are classified as deposit-taking institutions in the Banks Act. Only transactions that are settled on the same day as the trade date (T+0) and maturing the following business day (T+1) are eligible. The minimum transaction size is R20 million.
Although ZARONIA reflects unsecured overnight interbank transactions, its one-business-day tenor limits credit exposure. Trimming outlier rates minimizes risks, establishing ZARONIA as a near risk-free rate (RFR) aligned with global standards, similar to unsecured benchmarks like SONIA (UK) or €STR (Eurozone).
Following JIBAR’s cessation at end-2026, ZARONIA will become the standard RFR for ZAR derivatives, loans, and pricing, owing to its transaction-based reliability, reduced manipulation potential, and backward-looking methodology. This supports effective fallback protocols and economic equivalence through credit adjustment spreads, as no fully secured ZAR alternative (e.g., repo-based) adequately replicates interbank volumes.
Compounding in arrears is a methodology that compounds daily values of the overnight rate, throughout the relevant term period. Compounding in arrears differs from a typical term rate by calculating interest looking backwards and therefore such a methodology is usually accompanied by a brief period in advance of payment to set the interest rate and calculate payment.
The MPG’s “The Practical guide for ZARONIA-linked loans” provides a comprehensive overview of the calculation using compounded in arrears method for ZARONIA.
In this context, “fallback language” refers to contractual provisions that apply if the underlying reference rate in a certain product (e.g. JIBAR) is discontinued or unavailable. The MPG has recommended that market participants understand their contractual fallback arrangements and ensure that those arrangements are robust enough to prevent potentially serious market disruptions in a JIBAR cessation event.
SARB’s approach leverages the International Swaps and Derivatives Association (ISDA) methodology, widely recognized for its effectiveness in derivative contracts. ISDA has provided the MPG with its support and included the JIBAR fallback methodology in the “April 2025 Benchmark Module to the ISDA 2021 Fallbacks Protocol”, with ZARONIA as the replacement rate, and creating a JIBAR fallback protocol. On April 8, 2025, Bloomberg Index Services Limited began publishing official ISDA IBOR Fallback Rates for the JIBAR, primarily on dedicated terminal pages for benchmark transition data.
Key Bloomberg Pages
- FBAK <GO>: Serves as the main landing page for ISDA IBOR fallback rates, including ZAR-JIBAR adjustments, compounded ZARONIA spreads, and daily fallback calculations across tenors;
- OTC South Africa <GO>: Provides three key rates daily: the compounded ZARONIA, a CAS and an all-in fallback rate that combines the above two.
Market participants should review their contracts to identify whether adequate and robust fallback language has been implemented to address the cessation of JIBAR. In some instances, and these may differ on a case-by-case basis, the lack of adequate fallback language may result in the contract referencing the last published JIBAR rate on a continued basis (i.e. the reference rate will become fixed).
In case the loan document has been identified as having fallback language that may not allow for a smooth transition of the applicable loan interest rate to ZARONIA if JIBAR ceases to be provided, it may be necessary to amend the language of the loan document to facilitate such a transition when JIBAR ceases to be provided.
It is encouraged that borrowers review their loan documents to identify how they would address the anticipated cessation of JIBAR. To promote a consistent approach to address a cessation of JIBAR, it is encouraged to use recommended fallback language and approaches developed by the SARB and MPG to ensure impacted documents are smoothly transitioned to an endorsed alternative reference rate.
JIBAR and ZARONIA are calculated using different methodologies and therefore the published rates of the two benchmarks may not be the same. To accommodate the differences observed and minimize value transfer to the extent possible, industry working groups recommend the usage of a credit spread adjustment.
SARB has appointed Bloomberg Index Services Limited (BISL) as the official calculation agent responsible for determining and publishing the official fallback rates for the JIBAR transition to ZARONIA. BISL will publish three key rates daily: the compounded ZARONIA, a CAS and an all-in fallback rate that combines the above two. The relevant Bloomberg page is “OTC South Africa”.
The CAS Sub-workstream of the MPG recommended the ISDA methodology for calculating the CAS as most appropriate for the JIBAR transition. The ISDA fallback methodology consists of two components: an adjusted risk-free rate (RFR) and a spread adjustment. The spread adjustment is calculated as the median difference between the relevant IBOR and the adjusted RFR over a 5-year lookback period. On December 3, 2025 (the date of public announcement of JIBAR cessation), MPG decided to permanently fix CAS at 0.1619%. This rate will be consistently used for all the loans transitioning from JIBAR to ZARONIA, after December 31, 2026.
The NDB had previously established the LIBOR Transition Working Group, which is now conducting the preparation and implementation of JIBAR transition in different working streams, such as lending, funding, legal, information technology, client outreaching and accounting. The NDB is closely monitoring market development and proactively engaging with our borrowers for a smooth and successful transition from JIBAR.
The NDB is also collaborating with other multilateral development banks, South Africa regulatory authorities and major financial market players to track industry developments and adopts best practices.
The transition of the NDB loan portfolio with its borrowers follows a phased approach. The first stage is to implement contractual provisions regarding fallback of JIBAR in the relevant loan documents.
All new JIBAR loans issued before March 31, 2026, shall include robust fallback language. In 2019, NDB approved its 2019 version General Conditions (Loans to Sovereigns or Loans with Sovereign Guarantees) to include implementation of replacement reference rate. Any new loans to which the 2019 or subsequent versions of General Conditions are applicable will have provisions for a change of benchmark.
For legacy loan agreements, the NDB will implement a JIBAR omnibus amendment letter by signing with its counterparties side agreements including JIBAR fallback provisions in such loan agreements. This ensures a smooth and effective transition from JIBAR to new reference rates for existing loans. The pricing will be done in accordance with the SARB’s recommendations to avoid value transfer between the parties.
Following the initiative of standard JIBAR fallback language implementation, the NDB has continued conducting client communication on the JIBAR transition including the timeline of JIBAR transition, new ZARONIA pricing, ZARONIA billing convention, and other related matters.
NDB’s current billing practice is to invoice borrowers about 45 calendar days in advance of the billing due date. The same practice will be maintained. The new ZARONIA reference rates are backward-looking, as opposed to JIBAR’s forward-looking term structure. Therefore, to enable NDB to continue billing clients about 45 calendar days prior to the due date, the latest observed ZARONIA rates will be used to compute the amount to be billed for the last 45 days of the billing cycle. The interest calculation related to the last 45 days represents a preliminary calculation. Once actual ZARONIA rates for the last 45 days are observed in the market, this preliminary calculation will be subsequently adjusted in the following billing cycle to reflect the actual historical ZARONIA reference rates.
For loans using ZARONIA as a reference rate, the reference rate is a backward looking daily interest rate and the total lending rate can be calculated by sourcing the daily compounded rates published by the respective rate administrators for the respective periods. Because of the backward looking nature of those reference rates, the interest amount cannot be calculated for future periods.