Publication of a new interest rate benchmark, the South African Overnight Index
3 November 2022
Average, for observation by market participants
The South African Reserve Bank (SARB) today commenced publishing the South African Rand Overnight Index Average (ZARONIA), which is a financial benchmark that reflects the interest rate at which rand-denominated overnight wholesale funds are obtained by commercial banks. ZARONIA is based on actual transactions and calculated as a trimmed, volume-weighted mean of interest rates paid on eligible unsecured overnight deposits.
The publication of ZARONIA signifies an important milestone in the effort to reform interest rate benchmarks that are widely used as reference rates in the South African financial markets.
In 2018, the SARB embarked on an initiative to strengthen widely used reference rates and introduce alternative benchmarks that complied with the International Organization of Securities Commissions’ (IOSCO) ‘Principles for Financial Benchmarks’. The SARB proposed various benchmarks in a consultation paper and established the Market Practitioners Group (MPG) to make final decisions on the proposed benchmarks. Due to the shortcomings of the proposed benchmarks, a new suite of benchmarks was designed and published in the technical specification paper (TSP) ‘The Draft Statement of methodology and policies governing SARB- administered interest rate benchmarks’ in June 2020.