QUOTE AND NEWS
Mondo Visione  Jun 21  Comment 
Introductory Comments I want to thank you all for coming today, and I also want to thank the Alternative Reference Rates Committee (ARRC) for all its work in developing its interim report. This report marks a new stage in reference rate...
Clusterstock  Jun 21  Comment 
(Reuters) - Financial markets need to consider the risks of relying heavily on the dollar-based London Interbank Offer Rate (Libor) because this reference rate could stop being published, Federal Reserve Governor Jerome Powell said on...
Clusterstock  Jun 20  Comment 
By Kirstin Ridley LONDON (Reuters) - The jury in the London trial of five former Barclays traders charged with conspiracy to manipulate global Libor interest rates retired to consider its verdict on Monday after hearing more than 10 weeks of...
Clusterstock  Jun 17  Comment 
NEW YORK (Reuters) - HSBC Holdings Plc will pay $35 million to end private U.S. antitrust litigation claiming that it harmed investors by conspiring with other banks to manipulate the yen Libor and Euroyen Tibor benchmark interest rates. Papers...
newratings.com  Jun 16  Comment 
BRUSSELS (dpa-AFX) - The Swiss National Bank maintained its negative interest rate and repeated its view that the franc is still significantly overvalued. The interest rate on sight deposits at the central bank was retained at -0.75 percent, and...
Clusterstock  Jun 3  Comment 
The US Department of Justice indicted two former Deutsche Bank traders with one count of alleged conspiracy to commit wire fraud and bank fraud, and nine counts of alleged wire fraud, related to the manipulation of LIBOR. The DoJ confirmed in a...
Clusterstock  Jun 2  Comment 
Five former Barclays traders on trial for manipulating the LIBOR interest rate benchmark are giving their defence in London this week and several are blaming a bullying culture in the office for their actions, according to the Financial...
Financial Times  Jun 1  Comment 
Traders take stand during Libor manipulation trial
Clusterstock  May 27  Comment 
SYDNEY (Reuters) - Former Australian Rabobank [RABO.UL] trader Paul Dion Thompson on Friday consented to being extradited to the United States to face charges for alleged benchmark interest rate manipulation, a court said. Thompson was arrested...




 
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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