The end Of JIBAR and what ZARONIA means for SA
By Adrian Ephraim
FOR decades, the Johannesburg Interbank Average Rate (JIBAR) has sat at the heart of South Africa’s financial system, shaping interest payments on loans, bonds, derivatives and mortgages. By the end of 2026, that anchor will be removed.
The South African Reserve Bank (SARB) has confirmed that JIBAR will cease after its final publication on 31 December 2026, marking one of the most significant financial market reforms in the country’s history. In its place, markets are transitioning to the South African Rand Overnight Index Average — ZARONIA.
While the reform is regulatory in origin, its success depends on market execution. Standard Bank has emerged as a central player in that process, having issued South Africa’s first ZARONIA-linked floating-rate bond — a transaction that effectively provided the market’s first real pricing reference for the post-JIBAR era.
From concept to market reality
In 2025, Standard Bank issued a R100 million, three-year floating-rate note priced at ZARONIA plus 102 basis points. Though modest in size, the transaction was strategically important.
“The issuance provided the first live capital markets pricing reference for ZARONIA,” says Ross Lindstrom of Standard Bank. “It allowed the market to test pricing, documentation and settlement under a new benchmark.”
The deal followed confirmation that market infrastructure — including the JSE and Strate — was operationally ready to support ZARONIA-linked instruments. But readiness did not eliminate complexity. Pricing a bond over a rate with limited historical depth required judgement, particularly in determining an appropriate credit spread without comparable issuances.
Documentation posed further challenges, with fallback provisions and interest calculation mechanics needing to align with evolving industry standards. The transaction ultimately demonstrated market readiness and established a reference point for future issuances.
Why JIBAR is being retired
JIBAR’s replacement reflects structural change rather than failure.
Like LIBOR before it, JIBAR is based on submissions from banks estimating where they could borrow for specific tenors. Over time, the underlying interbank lending market has thinned, increasing reliance on judgement rather than observable transactions.
ZARONIA, by contrast, is a transaction-based overnight rate calculated from actual wholesale funding activity. It is backward-looking, more transparent and less susceptible to manipulation — attributes now required by global regulators.
The transition is being overseen by SARB in collaboration with the Market Practitioners Group (MPG), a cross-industry body representing banks, asset managers, corporates and infrastructure providers. Lindstrom chairs the MPG’s Industry Transition Workstream, placing Standard Bank at the centre of coordination efforts.
A transition measured in trillions
The scale of the reform is vast. JIBAR underpins an estimated R43 trillion in domestic
exposures, with offshore contracts referencing South African interest rates pushing total exposure well beyond R100 trillion.
For Standard Bank, the transition spans loans, bonds, derivatives and structured products across hundreds of billions of rands. While granular figures are not disclosed, Lindstrom confirms the task involves a significant volume of contracts, products and systems.
Standard Bank has been preparing since 2022, drawing on lessons from the global LIBOR transition. As with LIBOR, the bank will continue to disclose its JIBAR-related exposure in its financial statements until cessation.
Operationally, the transition requires extensive systems upgrades, changes to risk and pricing models, amendments to legal documentation and close client engagement.
Legal and conduct risk
One of the most critical risks lies in legacy contracts that lack robust fallback provisions. Without clear language, contracts could default to unfavourable rates or trigger disputes when JIBAR ceases.
Standard Bank has undertaken a comprehensive contract inventory and risk segmentation exercise to identify and prioritise exposures requiring remediation.
“Where remediation is required, we favour proactive bilateral amendments,” Lindstrom says. “That includes transparent engagement, clear explanations of credit adjustment spread methodology and alignment between loans and hedges to avoid basis risk.”
For derivatives, standardised industry mechanisms are used where appropriate, while more complex structures are addressed in line with evolving regulatory guidance. The bank’s guiding principles remain legal certainty, economic neutrality and minimisation of litigation risk.
Impact on consumers
Although the reform is concentrated in wholesale markets, retail products are not immune. Hundreds of thousands of South African home loans are ultimately linked to JIBAR.
Standard Bank’s retail communication strategy is aligned with regulatory guidance, the National Credit Act and Treating Customers Fairly principles. The focus is on clarity and simplicity — explaining what is changing, why it is changing and how monthly repayments may be affected.
Communication is being phased and tailored to retail sensitivities, with a clear transition roadmap to be implemented once final MPG guidance is confirmed.
Supporting corporate clients
Corporate treasurers face a different challenge, particularly those with complex loan facilities and derivative hedges.
Standard Bank has rolled out workshops, webinars and a dedicated ZARONIA information hub, alongside interest rate modelling tools that allow clients to assess exposure, simulate rate outcomes and compare ZARONIA with other risk-free rates such as SOFR.
“The objective is to equip clients with practical tools and transparent guidance to support informed transition planning,” Lindstrom says.
Lessons from LIBOR
The LIBOR transition looms large over the process.
“LIBOR showed that benchmark reform is an enterprise-wide transformation, not just a treasury exercise,” Lindstrom notes. Key lessons include early fallback remediation, alignment between cash products and derivatives, and clear communication.
For smaller institutions, the advice is direct: establish board-level oversight, inventory exposures early, align closely with industry standards and engage clients continuously.
As the clock ticks toward December 2026, the end of JIBAR is no longer theoretical. ZARONIA represents a more resilient, transparent benchmark — and a decisive shift in South Africa’s financial architecture.
