Accelerating your JIBAR transition programme: Why you must act now

Understanding the 3 transition approaches available

The Transition MPG categorises transition options into 3 broad approaches:(1) Passive, (2) Active and (3) Legislative. Market participants will likely apply a hybrid of all three depending on contract type, client and counterparty profile, operational constraints and market dynamics.

It is important to note that the transition pathways may differ both among market participants and within each organisation – with different product areas choosing to adopt differing approaches, or combinations of approaches. You must consider your specific contractual, legal, economic, accounting and tax and operational constraints or circumstances when choosing a particular remediation pathway for each product.

Critical warning: Legislative and passive transition are not “inactive”. Given there are just over 12-months remaining to Cessation, if not already completed, you should finalise the due diligence process to confirm your affected contract population requiring active, passive or legislative transition. This will position your organisation to begin client and counterparty communication and initiate your documentation remediation programme in earnest come January 2026.

Active transition

In contrast to passive transition, active transition involves contract amendment or repapering to move them away from referencing JIBAR before Cessation. You should take steps to engage with contracting parties around the available documentation transition options before moving forward with the amendment and repapering process. Once this contractual amendment has been made, the contract is no longer considered a “legacy” contract, and no further action will be required at Cessation.

Legislative transition

The draft General Finance Laws Amendment Bill, which is out for public comment, is intended to amend the Financial Sector Regulation Act 9 of 2017 (“FSRA”) to cater for the replacement of benchmarks in “tough legacy contracts”. This legislation will allow for the designation of replacement benchmarks in legacy contracts and introduce statutory safe harbours from liability for using these replacement benchmarks. Legislative transition is expected to play a central role for products where:

• Consent solicitation is impossible or impractical (e.g., securitisations and bonds or notes with multiple dispersed holders);
• Fallback language is absent or weak; or
• There is legal or operational complexity or uncertainty that makes active or passive transition difficult (e.g., securitisations).

This legislation will designate or determine:

• Replacement benchmarks;
• Appropriate credit adjustment spread;
• Benchmark-conforming changes; and
• The date from which the designated replacement benchmark applies.

However, you cannot rely on legislation alone. The Transition MPG has indicated that the most robust transition is likely an active one, and does not recommend a large-scale transition relying on the FSRA legislation, as this may expose the parties to some residual risks.

In exercising its powers, the SARB may publish by notice on its website which “tough legacy” contracts it has identified and designated as being capable of relying on the legislation for transition. For those identified and designated as such, you still need to prepare systems, communicate and notify clients and counterparties of impacts, update risk models, and understand how the statutory fallbacks will apply.

Product-specific documentation transition considerations

The Transition MPG Workstream’s draft Transition Approaches paper provides detailed recommendations across the following product classes:

• Derivatives;
• Loans;
• Bonds and Notes;
• Money Market instruments; and
• Securitisations.

Below is a consolidated overview of these recommendations:

Derivatives documentation – critical recommendations:

• From 30 April 2026, you need to demonstrate a consistent reduction in the gross outstanding notional of JIBAR-based derivatives;
• Consider your and your counterparties’ adherence stance to the ISDA Fallbacks Protocol as soon as possible but by no later than June 2026;
• Generate and maintain a summarised counterparty exposure report for all your bilateral JIBAR-based derivative inventory and regularly monitor the list of ISDA Protocol adhering counterparties. Non-adhering parties should be engaged well in advance of Cessation to discern transition intention;
• Prefer active transition in most cases, not sole reliance on the ISDA Protocol. For contracts being transitioned passively, the ISDA Fallbacks Protocol is recommended as the standard transition mechanism. Where a counterparty has not adhered to the Protocol, parties may still agree to incorporate the fallback provisions bilaterally in the relevant confirmations;
• If you are holding JIBAR-based inventory through central counterparties (“CCPs”) you must familiarise yourself with the transition procedures of the respective CCPs;
• Firms who originate transactions within the uncleared space and hedge within the cleared space must adequately cater for a potential mismatch in discounting regimes;
• Firms should consider constructing a combined JIBAR derivative/cash inventory and effect the transition of these instruments as a package; and
• Firms holding derivative inventory underpinned by a SAFEX denominated CSA’s should consider migrating their respective legacy CSAs from SAFEX to ZARONIA and reference all newly created CSA’s to ZARONIA.

Loans documentation – critical recommendations:

• Markets participants are requested to actively transition loans where possible;
• Loan portfolios benefit significantly from early remediation, especially where hedged. Begin legal, operational and transition programme vendor readiness by January 2026;
• Including market-standard fallback language in all new loans. The use of non-standard language can introduce delays and legal risk to all parties;
• Align transition of retail loans with transition of the associated funding instruments to maintain term and basis matching. Where legislative transition is being relied on, it is essential that you are able to ensure proper alignment between the underlying loans and the associated funding structures; and
• Given the complexities of the JIBAR transition in retail markets, actively engage in respect of the legislative solution being proposed and take proactive steps to engage early with retail borrowers to educate them around the impact of the transition to allow them to make informed decisions.

Bonds and notes – critical recommendations:

• Bondholder consent is often difficult and time consuming. Issuers must incorporate fallback language in new issuances, with active transition to be pursued where note/bondholder consent is achievable;
• Even if a legislative solution is deemed suitable and designated by the SARB, you should still ensure your systems are prepared to support the transition; and
• You need to communicate the impacts of applying legislative provisions related to the designation of replacement benchmarks well before Cessation.

Money Markets – critical recommendations:

• Assess whether consent is required;
• If consent is not required, communicate changes and amend operational systems;
• Align transition with interest reset dates to avoid “big bang” remediation; and
• Use bulk remediation before December 2026.

Securitisations – critical recommendations:

• Where a legislative transition is being relied on, it is essential that market participants are able to align transition timing across underlying loans and funding notes to maintain term and basis matching between assets and securitisation bonds (liabilities), ensuring continued commercial viability and avoiding potential rating downgrades;
• Ensure liquidity and funding remain functional through the transition window; and
• Include fallback language into new retail loans and Securitisation structures – which fallback language should provide for clear and transparent mechanisms for transitioning away from JIBAR on Cessation date, in a manner that complies with the National Credit Act.

Conclusion: The time for deliberation is over.

There is no upside to waiting. The market cannot afford participants to stand on the sidelines. The opportunity to transition smoothly is now – and decisive action will determine whether you navigate the shift safely or face unnecessary operational and financial disruption.

Cognia Law has the experience, the expertise and the capacity to support you in successfully navigating your JIBAR transition programme – don’t hesitate to reach out to us.

With Cognia, you don’t just meet the deadline: you meet it with certainty, clarity, and confidence.