What is LIBOR?
LIBOR stands for the London Interbank Offered Rate. It is a benchmark interest rate that is used to determine the cost of borrowing for banks and other financial institutions. It is calculated and published daily by the ICE Benchmark Administration (IBA) and is based on the interest rates that banks charge each other for short-term loans. LIBOR is used as a reference rate for many financial products, such as adjustable rate mortgages, student loans, and credit cards.
History of LIBOR
LIBOR was first established in 1986 by the British Bankers’ Association (BBA) as a way to measure the cost of borrowing between banks. It was initially based on the rates that banks charged each other for three-month loans in the London interbank market. Over time, the BBA expanded the range of currencies and maturities that LIBOR covered. In 2013, the BBA transferred responsibility for calculating and publishing LIBOR to the IBA.
Comparison of LIBOR Rates
| Currency | 1 Month | 3 Month | 6 Month | 12 Month |
|---|---|---|---|---|
| USD | 0.17% | 0.32% | 0.54% | 0.86% |
| EUR | -0.45% | -0.35% | -0.19% | 0.03% |
| GBP | 0.02% | 0.07% | 0.19% | 0.45% |
Summary
LIBOR is an important benchmark interest rate that is used to determine the cost of borrowing for banks and other financial institutions. It is calculated and published daily by the ICE Benchmark Administration (IBA) and is based on the interest rates that banks charge each other for short-term loans. For more information about LIBOR, you can visit the IBA website or the websites of the Federal Reserve, the European Central Bank, and the Bank of England.
See Also
- Federal Funds Rate
- Prime Rate
- Overnight Index Swap
- Euro Interbank Offered Rate (EURIBOR)
- Secured Overnight Financing Rate (SOFR)
- Overnight Bank Funding Rate (OBFR)
- Sterling Overnight Index Average (SONIA)
- Tokyo Interbank Offered Rate (TIBOR)
- Australian Bank Bill Swap Rate (BBSW)
- Swiss Average Rate Overnight (SARON)
