Complying with the reporting standards of the South African Reserve Bank (SARB) following the introduction of ZARONIA presented a challenge for the financial services industry.
For those unfamiliar with it, ZARONIA is a financial benchmark that reflects the interest rate at which rand-denominated overnight wholesale funds are obtained by commercial banks.
On 1st November 2022, the SARB published the South African Rand Overnight Index Average (ZARONIA).
This was a major milestone in the SARB’s alignment to international standards, to introduce alternative benchmarks that comply with the International Organization of Securities Commissions’ (IOSCO) ‘Principles for Financial Benchmarks’.
Consultation…and a rush
But compliance with the process was not a smooth one for the industry. The challenge, to start off with, was for the industry to ensure they met the SARB’s data reporting requirements.
To publish the ZARONIA rates, the SARB performs various computations of benchmarks on transactional data received from corresponding banks in South Africa. The SARB, as the Regulator, specifies and enforces that corresponding banks report this data in a certain expected format and at a determined frequency, to avoid penalties.
The next challenge was to meet the tight deadlines. The SARB had published a consultation paper on selected interest rate benchmarks in South Africa back in 2018. It contained proposals to reform key interest rate benchmarks, as well as provide recommendations on a suite of new benchmarks that could potentially be used as alternative reference interest rates.
A subsequent report on stakeholder feedback was published in May 2019 and a technical paper was published in June 2020 outlining the computations of various benchmarks including ZARONIA.
This was followed by the publication of a ‘Functional Requirements Specification’ in July 2021, which outlined the expected transactions and their definitions, the ISO 20022 definitions for data collection and the expected integration points. While this may sound like the SARB had given the industry enough of a ‘heads up’ the reality was a bit different.
Meeting tight deadlines
The communicated timelines left the industry very little time to react. The High Level Flight Plan included a design process which could be conducted between August and mid-September, a development process which could be executed between mid-September and the end of November and a testing phase, which had to start in December 2022 and could run into the first quarter of 2023.
For some banks, compliance was a problem as they had to work with old legacy systems. Fortunately for two banks, which had adopted Andile’s Tradebase Connector, it was an easier process.
Andile’s Tradebase Connector uses cloud computing technology, which allowed Andile to consume, transform and report our client’s data within the short timelines issued by the SARB. Andile’s two clients were able to meet SARB’S deadline, while meeting the data quality and reporting standards enforced by the SARB.
This enabled them to adopt SARB’s requirements in a smoother fashion and it was less of a frenzy to get the necessary compliance.
The future…
Compliance with ZARONIA is not the end. There are rumours that the SARB will require banks to report Foreign Currency transactional data in the same format and adopt the same methods in the not-to-distant future. Some believe this will become the regulator’s standard method of reporting in the future.
Fortunately, Andile’s Tradebase Connector provides our clients with a RegTech solution scalable to meet these future requirements. We encourage those in the financial services industry to consider SARB’s future possible requirements and whether they can afford to rely on legacy systems to match up to them. If not, Andile’s Tradebase Connector could offer a seamless solution to future compliance issues.