QUOTE AND NEWS
Bloomberg  Nov 26  Comment 
Traders facing penalties from British regulators over their involvement in rigging Libor may avoid being fined after the U.K. Financial Conduct Authority missed a deadline to take action, three people with knowledge of the ...
Bloomberg  Nov 24  Comment 
The Swiss National Bank’s reference interest rate is at its lowest level in at least two decades, a sign investors are bracing for extra policy measures to stem the franc’s appreciation.
Yahoo  Nov 17  Comment 
The Federal Reserve said it is hosting a meeting on Monday with banks and regulators to discuss the development of a reference rate alternative to LIBOR, the London interbank rate that was at the center ...
Mondo Visione  Nov 14  Comment 
Many banks are still "paralyzed" by new surveillance requirements according to Nigel Cannings, CTO of compliance and speech technology experts Intelligent Voice®. Photo - http://photos.prnewswire.com/prnh/20141114/158690 In the wake of...
guardian.co.uk  Nov 12  Comment 
Bank managements should be able to police their own trading floors or more substantive measures will be called for The rigging of foreign exchange markets is a bigger scandal than Libor. It lacks the element of surprise since it is no longer news...
Financial Times  Nov 12  Comment 
Heaviest penalties in history meted out in large part because banks have failed to learn lessons
guardian.co.uk  Nov 12  Comment 
From Libor rigging and sanction busting to forex manipulation, a look back at the global banking industrys offences and penalties Banks fined £2.6bn for foreign exchange market rigging The global banking industry racked up more than £166bn in...
Forbes  Nov 11  Comment 
The expected settlements with major banks over suspected manipulation of the foreign exchange market and the Libor settlements have demonstrated a whole new level of CFTC enforcement post-Dodd-Frank.




 
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
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki