The SARB’s refinancing system is the main mechanism that it uses to implement its monetary policy. 
 

In terms of this system, the SARB creates a liquidity requirement (or shortage) in the money market, which banks refinance at the repurchase (repo) rate – a fixed policy interest rate determined by the Monetary Policy Committee. Through the refinancing system, the SARB provides liquidity to commercial banks, which enables them to meet their daily liquidity requirements. ‘Liquidity’ in this context refers to the commercial banks’ balances at the central bank that are available to settle their transactions with one another, over and above the minimum statutory level of reserves that they have to hold.

 

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In the current refinancing system, the emphasis is on the size of the money market shortage, as it determines the eventual impact of the SARB’s market operations on commercial banks’ ability to grow their balance sheets – that is, to manage credit extension. This impact is exerted in two ways. First, it determines the availability and cost of commercial banks’ marginal funding requirements – that is, the funding needed for the excess asset growth on a daily basis. Second, banks have to pledge qualifying securities as collateral when conducting refinancing operations with the SARB. Funding that is locked into acquiring these qualifying assets restricts banks’ ability to extend credit.

Money market interest rates are determined by a combination of market forces and the repo rate. Fluctuations in the demand for, and supply of, liquidity in the market can influence market rates. For example, some interest rates tend to increase over month-end and decrease again when liquidity pressures subside. Furthermore, market interest rates may not always change by exactly the same margin as the change in the repo rate, depending on factors such as the extent to which a change in the repo rate has been anticipated and priced into the market.

 

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The SARB evaluates its monetary policy implementation framework on a regular basis for effectiveness and makes refinements when necessary. Changes were effected in 2001, 2005, 2007, 2010, 2012, 2013, 2016 and 2020. The adjustment made in August 2013 was to allow the money market shortage to increase gradually to reflect the growth trend in the autonomous factors impacting on money market liquidity. These autonomous factors include notes and coin in circulation outside of the SARB, and the required cash reserve balances of the commercial banks with the SARB at the start of the maintenance period.

Since September 2016, the SARB has, for operational reasons, adjusted its liquidity management strategy and managed the money market shortage at around the R56 billion level until March 2020. In March 2020, following the liquidity strains observed in various funding markets on the back of the COVID-19 crisis, the SARB implemented measures to add surplus liquidity to the market through the provision of additional repo facilities, with terms from overnight to 12 months. To further ensure that the additional liquidity circulates in the market, the penalty rate for depositing cash with the SARB at the overnight standing facility was increased. The overnight standing facility repo rate for commercial banks (borrowing) was changed from repo rate plus 100 basis points, to the main repo rate, whereas the overnight standing facility reverse repo rate for commercial banks (depositing) was changed to repo rate minus 200 basis points.

 

The main reason for the operations of the SARB in the money market is to implement the Bank's interest rate policy as determined by the Monetary Policy Committee, with the aim of achieving the SARB's inflation target. In its monetary operations, the Bank endeavours to promote financial stability by managing the liquidity needs of the banking system as a whole. It also contributes to the development and efficiency of the domestic financial markets, in particular the interbank market. The Financial Markets Department uses various instruments to conduct the Bank's monetary operations.

Fact sheet 9

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The daily calculation and publication of Jibar rates are essential for the efficient functioning of the South African money, capital and interest rate derivatives markets. These rates are important benchmark rates in South Africa and are used in determining the reset rate for over-the-counter swaps and forward-rate agreements. The JSE has, since the inception of Jibar, assumed the responsibility for providing the operational infrastructure in order to calculate and release the Jibar on a daily basis. The SARB is the administration agent for Jibar and monitors compliance with the Jibar Code of Conduct.

View Jibar rates here: Current market rates

 

The Sabor is a transactions-based benchmark rate for commercial banks’ overnight cost of funds. Sabor is made up of three components. As such, contributing commercial banks are required to submit transactions-based data on overnight funding raised in the interbank market, call deposit funding raised from their top 20 non-bank corporate clients and overnight funding raised from the foreign exchange forward market. Sabor enhances transparency and price discovery and serves as a reliable indicator of liquidity conditions in the overnight market. The SARB, in its capacity as administrator, calculates and publishes the Sabor rate on a daily basis.

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View Sabor rates here: Current market rates

 

The MMIS is used for the electronic submitting of bids for Repos, Reverse repos, Treasury bills and SARB debentures.

For more information contact:

Alfred Erasmus: +27 12 313-4472 
                            Alfred.Erasmus@resbank.co.za

Francois Aylward: +27 12 313-4085 
                               Francois.Aylward@resbank.co.za

Louise Saayman: +27 12 313-4353
                               Louise.Saayman@resbank.co.za

The Basel III liquidity framework requires banks to adhere to a new liquidity coverage ratio. In 2012, the Bank approved the provision of a  committed liquidity facility (CLF) to commercial banks to assist them in meeting their liquidity coverage ratio (LCR) as there is limited availability of high quality liquidity assets (HQLA) in South Africa. The Bank also approved that statutory cash reserves could be included in the banks’ high-quality liquidity assets (HQLA) in order to calculate the liquidity coverage ratio . Initially, the BSD published Guidance Note 5/2012 on 10 May 2012, which detailed acceptable collateral for the CLF. On 2 August 2013, it then issued Guidance Note 6/2013 (GN 6/2013) which contained revised guidelines in terms of acceptable collateral for the CLF, as well as further details on the operational requirements thereof. The Financial Markets Department formalised the operational arrangements pertaining to both the application for a CLF by a bank as well as draw-down on the facility in an Addendum to the Operational Notice.

G6 of 2016

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CLFOperational NoticeAddendum_August2016

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The SARB  has implemented a new framework that introduces modifications to the Bank’s accommodation/refinancing system in order to promote a more active domestic money market in South Africa.

  • Media Release
    Amendments to the list of eligible collateral pledged at the South African Reserve Bank for refinancing operation - Publish date: 2020-05-08
  • Media Release
    Further amendments to the money market liquidity management strategy of the SARB - Publish date: 2020-03-25
  • Media Release
    Changes to the money market liquidity management strategy of the South African Reserve Bank - Publish date: 2020-03-20
  • Media Release
    Press Release by the South African Reserve Bank regarding the issuing of an implementation paper on modifications to its money market operations - Publish date: 2005-05-10
     
Papers on changes to monetary policy operational procedures
 

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