QUOTE AND NEWS
Reuters  Nov 26  Comment 
Three former Barclays traders jailed for manipulating Libor benchmark interest rates after a London trial have been denied a request to appeal against their conviction and sentence, the wife of one said on Friday.
Financial Times  Nov 21  Comment 
Internal probe into how bank dealt with Libor affair clears him of wrongdoing
Reuters  Nov 20  Comment 
Deutsche Bank has nominated its chairman for a second term after an internal probe cleared him of accusations that he was partly to blame for the bank's poor cooperation with authorities in a probe into rate-rigging, a source close to the bank said.
Clusterstock  Nov 11  Comment 
Senior figures at the Bank of England reportedly knew about the "rigging" of the London Interbank Offered Rate (LIBOR) as early as mid-2007, according to documents used in a legal case and cited by several news sources including the BBC and The...
BBC News  Nov 10  Comment 
A court hears that the Bank of England was present at discussions of inaccurate Libor rates with senior executives of major banks, at the beginning of the credit crunch.
Wall Street Journal  Nov 8  Comment 
Efforts to replace the compromised Libor financial benchmark are running into their own problems, in part thanks to new rules governing money-market funds.
Reuters  Oct 26  Comment 
Barclays Plc and UBS AG have agreed to settle U.S. litigation by bondholders who accused the banks of conspiring with rivals to rig the Libor benchmark interest rate, lawyers for the plaintiffs said in court filings on Wednesday.




 
TOP CONTRIBUTORS

The graph to the left is for the 3 month LIBOR.

LIBOR, or the London Interbank Offered Rate, is the average interest rate between banks in the London interbank market. LIBOR is a widely used short-term interest rate benchmark since it is designed to reflect the cost of borrowing between some of the world's largest, most reputable banks.

What is LIBOR?

There isn't just one LIBOR; there are numerous rates determined by two variables:

Every business day at just after 11:00 am London time, the British Bankers' Association, in conjunction with Reuters, releases new rates for each combination of these.[3] For example, there's a new 3-month LIBOR for the yen, overnight LIBOR for the euro, and 2-week LIBOR for the pound released daily. These rates indicate both the health of the currencies (and their respective economies) relative to one another and expectations about future economic conditions.

There are ten LIBOR panels, one for each of the ten currencies for which the rate is determined. Each panel is composed of at least eight contributor banks, chosen for their reputations and their perceived expertise in a given currency. The BBA takes the daily deposit rates reported by its designated contributor banks and calculates the mean of the middle 50%; the resulting number is the LIBOR for the currency in question.[4] The average rates at which these banks say they would lend to one another is taken as an indication of the health of the banking systems of the ten LIBOR currencies. A list of the panels and their members as of May 30, 2008, can be found here on the British Bankers' Association's website.

Why is LIBOR important?

Not only does LIBOR provide information about the cost of borrowing in different currencies, it actually influences it. LIBOR is used as the basis for other interest rates across the globe. IE, variable interest rate loans such as mortgages and car loans will often be quotes at LIBOR + a percentage. For example, a loan that was LIBOR + 5% would charge 10% interest when the LIBOR is 5%, and 7% when the LIBOR is 2%.

Estimates for the total value of financial products with rates tied to LIBOR vary widely, from as low as $150 trillion,[5] to $360 trillion, [6]to as high as $500 trillion.[7]

LIBOR impacts financial instruments and products including:

Additionally, the difference between the libor rate and the interest rate on treasury bills is a key marker of the financial health of banks. For more information, see TED Spread.

Criticism

On May 29, 2008, the Wall Street Journal reported that certain banks had been reporting lower rates to the BBA than what WSJ analysis suggested they should have been.[8] Given the trillions of dollars tied to the LIBOR, even a small inaccuracy in either direction can cost lenders, borrowers, companies, or even whole economies billions of dollars. The WSJ study estimated that, if true, the artificially low U.S. dollar LIBOR saved U.S. borrowers about $45 billion over the first four months of 2008.[9] The banks, however, denied this claim and stuck by the rates they'd reported to the BBA and Reuters.

Charts





References

  1. British Bankers' Association - BBA LIBOR Panels
  2. BBA - Historic LIBOR Rates
  3. BBA LIBOR Frequently Asked Questions, British Bankers' Association.
  4. London Interbank Offered Rate - Wikipedia
  5. Yanked from Obscurity: Why Finance Experts Are Rethinking LIBOR - Knowledge@Wharton
  6. We are the World: We are LIBOR - LIBORATED.com
  7. Bankers Cast Doubt On Key Rate Amid Crisis - WSJ.com
  8. Study Casts Doubt on Key Rate - WSJ.com
  9. Study Casts Doubt on Key Rate - WSJ.com
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