Credit Adjustment Spread - CAS

Mandate of the Transition, Planning and Coordination Workstream (TPCW)

The MPG requested the TPCW to consider methodologies for determining the spread that would account for differences between JIBAR and ZARONIA, hereafter referred to as the credit adjustment spread. Furthermore, the workstream had to consider international best practice and to consult widely on its recommendations. The TPCW formed a dedicated sub-working group to carry out the technical work and to draft a consultation paper for the MPG and market participants’ consideration.

Using proxy and published ZARONIA rates, the TPCW calculated spread adjustments and analysed the impact of changes in the South Africa Reserve Bank’s (SARB) Monetary Policy Implementation Framework, interest rate cycles, and the impact of the COVID period. The results of the analyses did not suggest any material reason to deviate from the standard ISDA fallback methodology. Consequently, the MPG recommends that, where appropriate, the Jibar fallback provisions should specify compounded ZARONIA and a spread that accounts for the differences between Jibar and ZARONIA. The spread should be based on a historical median of the differences between Jibar and compounded ZARONIA over a five-year lookback period.
 

JIBAR vs ZARONIA Background:

There are inherent structural differences between Jibar and ZARONIA. Jibar is available in multiple tenors while ZARONIA is an overnight rate. Also, Jibar incorporates a bank credit risk premium and other factors. As such, it would be necessary that a ZARONIA-linked replacement rate includes a spread adjustment to ensure that there is minimal economic value transfer and contracts continue to meet the original objectives of the counterparties to the greatest extent possible.

The MPG prefers the use of the ISDA fallback protocol to ensure maximum participation in the JIBAR transition and eliminate the need for market participants to bilaterally renegotiate derivative and other “covered” contracts.

Referring to the JIBAR transition plan published by the MPG, a formal announcement on the JIBAR cessation is expected in December 2025. This would serve as the Jibar cessation trigger date. This is important as credit adjustment spreads would be fixed at this date (or possibly earlier should JIBAR no longer be considered representative).

The ISDA fallback methodology requires the calculation of the difference between Jibar and the corresponding compounded ZARONIA rate for a five-year lookback period. The median value of this spread within the lookback period is taken as the fallback spread. A five-year period corresponds to a five-year period of Jibar observations and a ‘five-year plus the JIBAR tenor’ period of ZARONIA observations.
 

JIBAR Replacement South Africa:

The South African Reserve Bank (SARB) confirmed on 3 December 2025, that the Johannesburg Interbank Average Rate (JIBAR) will be permanently discontinued after its final publication on 31 December 2026. From that date, all JIBAR tenors will cease to be provided and will be considered non-representative.
 

CAS Spreads Fixed:

On the 3rd of December 2025 the CAS spreads were fixed as below:
 

Links

JIBAR Fallback Methodology – Final MPG Recommendation