QUOTE AND NEWS
Yahoo  Jul 25  Comment 
Germany's financial watchdog Bafin has cleared Deutsche Bank's former co-chief executive Anshu Jain of lying to the Bundesbank during investigations into interest rate manipulation, the Financial Times reported on Saturday. Citing a copy of a...
The Hindu Business Line  Jul 25  Comment 
Indian-origin banker Anshu Jain, Deutsche Bank’s former co-chief, has got a clean chit from the German financial watchdog BaFin, on charges of allegedly lying to the regulators about the interbank...
Wall Street Journal  Jul 21  Comment 
Former bank trader Tom Hayes’s efforts to move benchmark interest rates were so explicit and out in the open that he clearly didn’t view what he was doing as dishonest or inappropriate, his defense team argued.
Financial Times  Jul 19  Comment 
UK markets regulator has focused on Libor and forex-rigging
Forbes  Jul 19  Comment 
Deutsche Bank is in the wars again. The German regulator BAFIN has released a damning report (link courtesy of the Wall Street Journal) into regulatory and compliance failures regarding benchmark rate rigging – Libor and its relatives, plus...
guardian.co.uk  Jul 17  Comment 
Martin Wheatley’s resignation is another victory for the increasingly bullish banks – George Osborne has capitulated again It’s job done as far as Britain’s banks are concerned. The departure of Martin Wheatley as the head of the City’s...
Yahoo  Jul 17  Comment 
Deutsche Bank has disputed allegations by Germany's financial watchdog, sources close to the lender said, in its official response to a preliminary report into interest rate manipulation which threatens sanctions against the bank and individuals....
Financial Times  Jul 16  Comment 
Court told an interdealer broker cautioned the former trader to be careful about written requests
Clusterstock  Jul 15  Comment 
By Kirstin Ridley LONDON (Reuters) - Tom Hayes, a former trader on trial on Libor manipulation charges, told a London court on Wednesday he had made mistakes and "educated guesses" during interviews with investigators while he was cooperating...




 
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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