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Interbank rates

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 26 Apr 2023

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Interbank Rates

Interbank rates, also known as the overnight rate, refer to the rate of interest charged on short-term loans between banks. Banks borrow and lend money to each other on a daily basis to meet their short-term liquidity needs. The rate at which banks lend to each other is known as the interbank rate. This rate is determined by the market forces of supply and demand, and is usually lower than the rate at which banks lend to their customers.

History of Interbank Rates

Interbank rates have been around since the early days of banking. In the past, the rate was determined by the central bank of the country, but in recent years, it has been determined by the market forces of supply and demand. The rate is usually lower than the rate at which banks lend to their customers, as banks are more likely to lend to each other than to individual customers.

The interbank rate is an important indicator of the health of the banking system. When the rate is high, it indicates that banks are reluctant to lend to each other, which could be a sign of a weak banking system. Conversely, when the rate is low, it indicates that banks are willing to lend to each other, which could be a sign of a strong banking system.

Table of Comparisons

Country Interbank Rate
United States 0.25%
United Kingdom 0.10%
Japan -0.10%
Germany -0.50%

Summary

Interbank rates, also known as the overnight rate, refer to the rate of interest charged on short-term loans between banks. The rate is determined by the market forces of supply and demand, and is usually lower than the rate at which banks lend to their customers. The interbank rate is an important indicator of the health of the banking system, and can be used to compare the relative strength of different countries’ banking systems. For more information on interbank rates, you can visit the websites of the central banks of the countries listed in the table above.

See Also

  • Interest Rates
  • Money Market Rates
  • Prime Rate
  • Discount Rate
  • Federal Funds Rate
  • Libor Rate
  • Overnight Index Swap Rate
  • Repo Rate
  • Swap Rate
  • Treasury Bill Rate

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