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Clusterstock  Aug 27  Comment 
By Nate Raymond NEW YORK (Reuters) - Two former Rabobank [RABO.UL] traders urged a U.S. judge on Thursday to dismiss an indictment accusing them of engaging in a scheme to manipulate Libor, the benchmark interest rate at the center of a global...
Yahoo  Aug 27  Comment 
The U.S. Labor Department is leaning toward denying requests for regulatory relief by three big foreign banks that pleaded guilty to manipulating Libor interest rates but want to keep managing retirement accounts for clients. "We continue to...
guardian.co.uk  Aug 27  Comment 
Current and former traders interviewed by SFO about manipulation of London interbank offered rate and euro counterpart Current and former Deutsche Bank staff have been questioned by the Serious Fraud Office in recent weeks in relation to the...
Yahoo  Aug 21  Comment 
Barclays Plc (BARC.L) shareholders who accused the British bank in a lawsuit of inflating its stock price by manipulating the interest rate known as Libor may pursue their case as a class action, a U.S. judge ruled on Thursday. U.S. District Judge...
guardian.co.uk  Aug 13  Comment 
Does the interest rate benchmark influence your business’s bottom line? We take a look at the points to consider – and the steps to take if it does Since the issue of Libor manipulation reared its head in 2012, there has been a lot of...
guardian.co.uk  Aug 9  Comment 
The new regulatory regime for banks and brokers will force senior managers prove they are taking steps to prevent fraud. At least, that’s the theory This week’s 14-year prison sentence for Tom Hayes, the former UBS and Citigroup trader...
Forbes  Aug 7  Comment 
Erika Kelton points out there is no safety in numbers when it comes to committing fraud. Former UBS trader Tom Hayes defended his efforts to rig Libor by insisting that everyone does it. That attitude, sadly, is shared by Wall Street and City...
guardian.co.uk  Aug 6  Comment 
Joshua Rozenberg’s justification of Judge Cooke’s 14-year sentence on my son, Tom, for conspiracy to defraud (14 years in jail for Libor rigging? The judge makes a persuasive case, 4 August) may satisfy those who think there is no penalty too...




 
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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