QUOTE AND NEWS
Euromoney  Feb 8  Comment 
The story of convicted Trader A – Tom Hayes – lays bare the actions of a few cliques that masterminded the headline-grabbing Libor scandal, but despite Hayes’ conviction it is still notoriously difficult to pin blame on individual traders...
Clusterstock  Jan 31  Comment 
LONDON — Tom Hayes, the former banker convicted for his role in rigging the London Interbank Offered Rate (LIBOR), has written a letter from Lowdham Grange prison in Nottinghamshire outlining why he is appealing his case to the Criminal Cases...
guardian.co.uk  Jan 31  Comment 
Tom Hayes, serving an 11-year sentence, claims he felt under pressure to admit guilt in order to avoid being extradited to US The jailed City trader Tom Hayes is to submit his case to the Criminal Cases Review Commission (CCRC) in an effort to...
Yahoo  Jan 30  Comment 
Tom Hayes, the first person worldwide to be jailed for conspiring to manipulate Libor interest rates, on Monday night launched a last-ditch appeal against his conviction and 11-year sentence in Britain, alleging his trial was unfair. Hayes, a...
Yahoo  Jan 26  Comment 
A U.S. appeals court on Thursday questioned whether two former Rabobank traders' rights were violated in what became the first case by U.S. Justice Department to go to trial spilling out of global probes into the manipulation of Libor. Over 1-1/2...
guardian.co.uk  Jan 18  Comment 
With arrogant disregard for the rules, traders colluded for years to rig Libor, the banks’ lending rate. But after the crash, the regulators were on their trail At the Tokyo headquarters of the Swiss bank UBS, in the middle of a deserted...
SeekingAlpha  Jan 6  Comment 
WA Business News  Jan 6  Comment 
In this Business News podcast, Mark Beyer and Mark Pownall discuss Roe 8, house prices, Libor scandal, Atlas Iron and WA’s education market.
Financial Times  Jan 5  Comment 
Serious Fraud Office interviews former group treasurer in fresh inquiry




 
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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