Johannesburg interbank acceptance rate (JIBAR)

Definition

The Johannesburg interbank acceptance rate (JIBAR) is a benchmark interest rate used in South Africa’s financial markets. 

What is the Johannesburg interbank acceptance rate?

JIBAR represents the average interest rate at which South African banks are willing to lend to one another on an unsecured basis for a specified term, typically ranging from overnight to one year. JIBAR serves as a key reference rate for pricing various financial instruments, including loans, bonds, and derivatives, and it plays a key role in determining the cost of borrowing and the overall interest rate in South Africa.

JIBAR rates are calculated daily by the JIBAR administrator based on submissions from a panel of contributing banks. Each contributing bank provides its estimate of the interest rate at which it could borrow funds in the South African interbank market, considering factors such as prevailing market conditions, liquidity, credit risk, and funding needs.

The calculation and administration of JIBAR are subject to regulatory oversight and governance standards to ensure the accuracy, integrity, and transparency of the benchmark rate. Regulatory authorities may prescribe rules and guidelines for the determination of JIBAR rates and monitor compliance with regulatory requirements to prevent manipulation or abuse of the benchmark.

Changes in JIBAR rates can have significant implications for financial markets and the broader economy. Movements in JIBAR reflect shifts in interbank lending conditions, liquidity dynamics, and monetary policy expectations, influencing borrowing costs, investment decisions, and the pricing of financial assets across various sectors of the economy.

Example of the Johannesburg interbank acceptance rate

An example of the Johannesburg interbank acceptance rate in action could involve a South African bank borrowing funds from another bank for a short-term period, say one month. If the prevailing rate is 6%, it means that the borrowing bank would pay an annualised interest rate of 6% on the amount borrowed for the one-month period.