Row rect Shape Decorative svg added to bottom RISK MANAGEMENT | 13 December 2024 Benchmark Reform: Assistance with publications Absa | Corporate and Investment Banking > Insights and Events > Benchmark Reform | Assistance with publications SHARE On 29 November 2024, the Market Practitioners Group published three significant consultation papers, based on the recommendations of various working groups. The three papers are: JIBAR Fallback Methodology Recommendation Consultation on market conventions for ZARONIA-based non-linear derivative instruments Recommendations for a ZARONIA-First initiative in the derivatives market Below is a brief view of the key takeaways of the different publications. Proposal for jibar transition and fallback credit adjustment spreads for the south african interest market In pursuance of a smooth transition from JIBAR to ZARONIA, the SARB Market Practitioners Group has recommended that the South African interest rate market adopt the standard International Swaps and Derivatives Association fallback methodology for calculating a fallback adjustment spread, namely the median value over a five-year lookback period. A fallback adjustment spread is required by market participants to transition contracts from JIBAR to ZARONIA, and there is a unique Credit Adjustment Spread for every tenor. This is due to the inherent structural differences between JIBAR and ZARONIA given that JIBAR is available in multiple tenors while ZARONIA is an overnight rate. The fallback adjustment spread aims to ensure that contracts originally negotiated to reference JIBAR continue to meet the original objectives of the counterparties to the maximum extent possible. Full article: JIBAR Fallback Methodology Recommendation Recommendation for a “zaronia first” initiative in the derivative market In furtherance of efforts to enhance market liquidity in ZARONIA-based derivatives, the proposed “ZARONIA -First" initiative is modelled on similar initiatives in the US and UK – “SOFR First” and “SONIA First” respectively. The recommendation considers global learnings as well as nuances specific to the South African market, with the ultimate objective to migrate liquidity in JIBAR to ZARONIA-based derivatives. Full article: Recommendations for a ZARONIA-First initiative in the derivatives market Market conventions for zaronia-based non-linear derivatives The Derivative Workstream deliberated on and summarised recommended standard market conventions for the non-linear derivatives that will reference ZARONIA. The recommendations and suggestions for market microstructure, products and associated conventions for ZARONIA -based non-linear derivatives are considered to be critical to enable similar financial functionality and utility as the current, but soon-to-be ceased, JIBAR-based non-linear derivatives market. Full article: Consultation on market conventions for ZARONIA-based non-linear derivative instruments Additional information For an overview of the JIBAR transition to ZARONIA please see the Absa benchmark reform web page - https://cib.absa.africa/home/insights-and-events/benchmark-reform-jibar-to-zaronia/ You can also reach out to your Relationship Manager for more information on how the transition will be affecting your business. https://www.cib.absa.africa/wp-content/uploads/2020/07/file_example_MP3_700KB.mp3 Related Articles RISK MANAGEMENT How Finance Can Help Build More Integrated African Supply Chains If one were to speak to African suppliers who trade across borders, many would say that doing business within the continent can feel riskier than exporting beyond it. Especially for small and medium-sized enterprises (SMEs), information on counterparties is not always easy to obtain, regional currencies can be volatile and difficult to hedge, forward markets offer little depth, and access to affordable finance is often limited at precisely the moment it is needed most. Read more RISK MANAGEMENT What Bidvest’s Eurobond Tells Us About the Maturation of SA’s Debt Capital Market The international high-yield bond market functions as one of the largest and most technically evolved sources of corporate funding in the global financial system. Read more RISK MANAGEMENT Africa’s Capital Markets Are Moving Again. Here’s How. Kenyan beverages giant East African Breweries recently refinanced an existing KES 11 billion corporate bond through a medium-term note priced at 11.8%, marking the first issuance under its newly approved KES 20 billion programme. Read more
