Share

UK rate scandal: 'SA banks sound'

Johannesburg - In the wake of the scandal that erupted in the UK over the manipulation of the London Interbank Offered Rate (Libor) – the rate of interest at which banks lend money to each other – South African financial authorities have moved to reassure the country that the process for determining the interbank lending rate in the country is sound.

The Libor scandal now involves as many as 12 leading banks, including Absa’s parent bank, Barclays, which has already been heavily fined.

Sharp focus is now being placed on the Johannesburg Interbank Agreed Rate – or Jibar.

The Jibar, or money market rate, is used to price financial transactions across our domestic economy.

According to a Morgan Stanley research report released this week, 11 other British banks could join Barclays and be penalised for their part in the scandal.

The report says that the combined regulatory penalties and damages to investors and counter parties could stand at an estimated £14bn (R180.5bn).

South African banks have been relatively unaffected – local regulators have moved to reassure the investing and banking public that the process of determining Jibar is characterised by soundness and integrity.

Jibar determines the cost at which South African banks loan one another money.

It is an approximation of what the banks believe the repo rate (the rate determined by the Reserve Bank’s monetary policy committee) will average over the next three months.

Given that prime is 3.5% above the repo rate, Jibar is on average 3.5% below prime.

Jibar is compiled by the JSE on the basis of contributions received from nine South African commercial banks.

The Jibar rate is published at 11:00 on a daily basis.

Mark Brits, general manager of the banking and finance division of the Banking Association of SA, said that the association was “comfortable with the way that the Jibar rate is determined”.

Brits said in the light of what had happened in the UK with the Libor rate, “it was an appropriate time for our regulators to confirm the integrity of our domestic processes, and we look forward to working with them on this”.

The Banking Association of SA, according to Brits, expects that the regulators of the banks would test the validity of the processes for determining the rate from time to time.

He said banks remained confident that the processes were sound and the rate was determined in a respectable way.

The SA Reserve Bank said it had confidence in the process of determining the Jibar rate, but South African regulators had announced that a commission to make recommendations about Jibar was being established.

The British regulator of banks fined Barclays £290m (R3.7bn) for its role in rigging Libor rates between 2005 and 2009.

Barclays’ chairperson Marcus Agius was interrogated by British financial authorities this week as regulators are increasingly seeking to bring order to financial institutions they deem to be improperly managed.

The Economist this week reported that Agius confirmed to British MPs that the Bank of England had forced Barclays’ chief executive Bob Diamond to resign after the bank’s misdeeds became public.

Diamond is leaving Barclays with a £2m payoff.

He has already received more than £100m since 2005.

*For more on this and other Fin24 stories, go to our Facebook, Twitter and Google+ pages.


 
We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
19.02
-0.6%
Rand - Pound
24.00
-0.4%
Rand - Euro
20.53
-0.3%
Rand - Aus dollar
12.35
-0.0%
Rand - Yen
0.13
-0.6%
Platinum
901.20
+0.5%
Palladium
997.97
-0.4%
Gold
2,210.69
+0.7%
Silver
24.71
+0.3%
Brent Crude
86.09
-0.2%
Top 40
68,075
+0.6%
All Share
74,269
+0.5%
Resource 10
56,834
+2.1%
Industrial 25
103,553
+0.3%
Financial 15
16,490
-0.2%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders