DA: probe Jibar process

The DA wants Finance Minister Pravin Gordhan to order a Reserve Bank investigation into the setting of the Johannesburg interbank agreed rate (Jibar) in order to reassure South Africans that no manipulation of rates is taking place.

DA finance spokesman Tim Harris said at the weekend that the minister of finance should move quickly.

The Jibar is effectively the cost at which South African banks borrow from each other.

Any irregularity of the rate would affect everyone from investors and borrowers right down to the ordinary retail banking clients, Harris added.

In a statement yesterday, the DA said that banking regulators in markets around the world were investigating allegations that the London interbank offered rate (Libor) and other interbank rates were rigged by banks for their benefit.

The DA said a local investigation should be carried out despite earlier statements by the Reserve Bank’s deputy governor Daniel Mminele that there was not anything to suggest that there could have been any manipulative practices in the South African market with regards to Jibar fixing.

But Harris said: “The full extent of the fraud in the British banking system, however, was also not detected by regulators and only came to light after a full investigation.”

Responding to the DA’s statement, the Reserve Bank said that it would await the finance minister’s view on the matter. Gordhan’s office would not comment yesterday.

Reserve Bank spokesman Hlengani Mathebula said the Jibar was published daily at 11am for interest periods of one, three, six and 12 months.

“The three-month Jibar rate is the most widely used and accepted as a benchmark,” Mathebula said.

According to the Reserve Bank, the Jibar is compiled by the JSE on the basis of contributions received from nine commercial banks.

Unlike the Libor, which represents an estimate by banks in the London market of what they believe they could borrow funds at, the Jibar rate is based on interest rates at which banks buy and sell their own negotiable certificates of deposits, and represents the actual rates which can be traded in the money market.

“While understandably the SA Reserve Bank is not in a position to vouch for the contributions of the banks to the calculation, nothing has come to our attention to suggest that there could be problems with the calculation of Jibar. We continue to have confidence in the process of fixing Jibar rates,” Mathebula said.

The Reserve Bank stated that it had, together with commercial banks, launched a project to review the process and procedures surrounding the Jibar and its determination. The bank stressed that this project was not as a result of any problems encountered or suspected. It is anticipated that the project, along with any enhancement, will culminate in a code of conduct for contributing banks.

The DA’s concerns come after the top three executives at the UK’s Barclays bank resigned over the manipulation of the Libor.