and treasury management systems that required reconfiguration to make them compatible with overnight rates that are compounded in arrears ; • standardised legal documentation that facilitate syndicated lending and other loans ; • the development of market conventions referencing the overnight risk - free rate ; and • the development of new loan products that reference the policy rate or an alternative forward - looking term rate. 18 it is essential to note that the work on finding a forward - looking term rate, or, in keeping with the reference rate reform parlance, a zaronia term rate, is still at an infant stage. previous attempts at constructing a new term rate based on deposit transactions, as detailed in the sarb ’ s consultation paper ( 2018 ) and technical specification paper ( 2020 ), failed due to design flaws and data insufficiency. developing a zaronia term rate is dependent on the derivatives market building sufficient liquidity to underpin the working group on sterling risk - free rates ( 2020 ), use cases of benchmark rates : compounded in arrears, terms rate and further alternatives page 9 of 12 term rate. consequently, we would encourage the market to adopt zaronia compounded in arrears as a primary vehicle for the jibar transition and not wait for a zaronia term rate, unless necessary. 7. on the next steps we are almost halfway through the zaronia observation period, which will end on 31 october 2023. market participants should use the remaining time to assess the implications of using the rate in financial contracts and issues that could potentially hinder their transition away from jibar. the mpg structures provide a good platform for raising such issues, such as the industry task forces that are managed by the transition planning workstream and the mpg communications workstream ’ s regular virtual forums, which provide updates on its work programme. 19 the sarb would prefer a relatively short jibar transition period. therefore, market participants are encouraged to actively transition as soon as possible to avoid what was witnessed during the libor transition. despite repeated advice from regulators and national working groups, most market participants did not take any action to reduce their exposure until the ‘ endgame ’ for libor was in sight. 20 to illustrate, in 2018 the alternative reference rates committee21 ( arrc ) estimated that there were about usd200 trillion financial contracts that referenced usd libor outstanding and that 80 % of those contracts would mature in the same year. instead of the value of the outstanding contracts decreasing over the ensuing

analysts framed the weaknesses in the design of the london interbank offered rate ( libor ) as a case of ‘ measurement error ’ 2, pointing out that libor tended to be less representative of actual interbank rates during times of stress as certain contributing banks, being weary of revealing information that might increase their borrowing costs, would submit biased quotes. based on these findings, several jurisdictions convened national working groups to review their respective ibors. there was widespread agreement that ibor rates should be discontinued and replaced with more robust risk - free or near risk - free rates. some regulatory authorities went a step further, such as the united kingdom ’ s ( uk ) financial conduct authority ( fca ), which no longer compelled panel banks to fsb ( 2014 ), reforming major interest rate benchmarks. baba, parker and nagano ( 2008 ), the spillover of money market turbulence to fx swap and cross - currency swap markets – bis quarterly, march 2008 page 2 of 12 continue their libor submissions after december 2021, effectively heralding the end of libor3. 3. is it necessary to do away with jibar? considering the global effort to reform key reference rates, the south african reserve bank ( sarb ) evaluated the design of jibar against the recommendations of the international organization of securities commissions ( iosco ) principles of financial benchmarks. this was necessary because jibar, in particular three - month jibar, is a widely used reference rate in financial contracts. the latest jibar - related exposures survey results estimated that the total value of outstanding contracts that reset against the three - month jibar rate exceed r30. 6 trillion4. jibar is also a key input in the determination of the short - term fixed - interest ( stefi ) index, which is a non - tradable index used to benchmark the performance of money market portfolios. through this evaluation, the sarb found, like many other countries, jibar exhibits some of the weaknesses that were observed in the design of certain ibors. the benchmark is based on indicative rates from only five contributing banks, making it vulnerable to manipulation. however, unlike libor, the indicative rates are quoted on active screens, and hence they are tradable for all transactions whose nominal falls between r20 million and r500 million5. while this feature lends more credibility to jibar, on its own it is unlikely to be effective in minimising the risk of manipulation. furthermore, the iss