QUOTE AND NEWS
SeekingAlpha  Apr 17  Comment 
guardian.co.uk  Apr 16  Comment 
Labour’s John McDonnell brands government silence over claim of collusion from within Threadneedle street as unacceptable John McDonnell, the shadow chancellor, is calling on Philip Hammond to hold an urgent public inquiry into whether Bank of...
SeekingAlpha  Apr 14  Comment 
Clusterstock  Apr 12  Comment 
Former Barclays trader Alex Pabon was sentenced to two years and nine months in prison for his role in LIBOR fixing. He was released from prison in March 2017 — serving just under a year. Pabon spoke to Business Insider about how he is...
Euromoney  Apr 10  Comment 
The BBC is broadcasting on Monday an episode of Panorama that will present new material relating to the Barclays Libor affair: here is a guide to some of the related evidence from the UK Treasury Select Committee inquiry in 2012.
Motley Fool  Apr 10  Comment 
Just a slight increase in rates today -- nothing too dramatic.
Financial Times  Apr 10  Comment 
Employees at lender discussed pressure from central bank, according to transcript
Clusterstock  Apr 10  Comment 
Tom Hayes, the former banker convicted for his role in rigging the London Interbank Offered Rate, says "traders like me should not be in prison" because the Bank of England pressured commercial banks to keep Libor low. Hayes, who was sentenced...
Clusterstock  Apr 10  Comment 
A secret recording of two former Barclays bankers allegedly puts the Bank of England in the middle of the LIBOR fixing scandal that rocked the country, says the BBC. In the recording from 2008, one banker claims that the central bank was...




 
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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