2021 South African IBOR Transition Readiness Survey: Where South African entities are and the next steps

Interest rate benchmark reforms 

Interest rate benchmarks around the globe, amongst others, the London Interbank Offered Rate (LIBOR), the Johannesburg Interbank Average Rate (JIBAR) and other Interbank Offered Rates (IBORs) are being reformed. Regulators and interest rate benchmark administrators have flagged certain popular benchmarks with expiry dates. These benchmark cessations are part of interest rate benchmark reforms that aim to address safety and soundness risks. Impacted contracts are expected to be transitioned towards Alternative Reference Rates (ARRs).
 

The SARB, as the benchmark administrator of JIBAR, has neither identified an ARR succeeding JIBAR nor announced a JIBAR cessation date, however its publication in April 2021 stated that the SARB has decided that the JIBAR will cease and that an alternative reference rate is being developed. While JIBAR is the most used benchmark in South Africa, South African entities, especially banks, reference foreign IBORs to a large extent in their contracts.
 

EY’s recent South African IBOR Transition Readiness Survey aimed to understand South African entities’ IBOR transition plans and progress as well as the challenges and risks they face. The survey highlighted how important it is for entities to stay on track with their transition plans, to communicate with their counterparties on both existing and new contracts and to prepare for the upcoming JIBAR transition. In recent years, EY has supported clients around the globe in their endeavours to transition away from IBOR.

The broad impact array of the transition on technology, operations, risk & models, accounting, and tax means that entities require a partner with broad, yet deep, capabilities across all these fields to ensure they successfully navigate the transition.

Please reach out to one of our team members to learn more about our IBOR Transition insights and the related services that we offer.
 

Matthew Walker – EY Africa Financial Services, Quantitative Advisory Services, Director (Matthew.H.Walker@za.ey.com)

Moritz Zurker – EY Africa Financial Services, Quantitative Advisory Services, Senior Manager (Moritz.Zuerker1@za.ey.com)

It is important that impacted entities increase their efforts in communicating with their counterparties and we encourage timely and effective communication between entities and their investors and regulators, among other stakeholders. Entities should contact their trusted advisors for further advice.