What Is an Interbank Rate?

The Interbank Offered Rate (LIBOR) refers to the short-term loan interest rate between banks. It has two interest rates, the borrowing rate indicates the interest rate that the bank is willing to borrow; the borrowing rate indicates the interest rate that the bank is willing to borrow. The borrowing (borrowing) of one bank is actually the borrowing (loaning) of another bank. The interest rate spread between the same bank's borrowing and borrowing rates is the bank's earnings.

Interbank Offered Rate

The Interbank Offered Rate (LIBOR) refers to the short-term loan interest rate between banks. It has two interest rates,

Interbank borrowing refers to the use between commercial banks

Interbank interest rate, we often say LIBOR + 50bp, what does this bp mean

It can also be expressed as: + 0.5%, which means adding 50 basis points to the borrowing rate, Basis Point (BP) basis point; one basis point equals one hundredth of a percentage point (%).

Interbank interest rate autonomy

Interbank lending is a kind of credit behavior. When conducting lending funds transactions, the rights and obligations of market entities (both parties to the transaction) must be recognized and respected. The principles of voluntary negotiation, equality, mutual benefit, and independent transactions must be strictly followed to protect the legitimate rights and interests of market operators To form an orderly environment of equal competition and ensure a reasonable flow of funds.

Interbank interest rate repayment

For the dismantling party, since the dismantling is temporarily unused funds of the Bank, there is a certain period limit, so it must be recovered on schedule. For the borrower, the borrowed funds only have the right to use the funds within a certain period of time, do not have the right to use them for a long time, and do not change the ownership of the funds, so they must be repaid in full at maturity.

Short-term interbank interest rates

One of the typical characteristics of interbank lending is short term, which is a kind of short-term financing. From the perspective of the dismantling party, the dismantled funds are temporarily idle funds of the bank, and there is uncertainty in terms of quantity and duration. Therefore, its use of funds must be short-term. As far as the borrower is concerned, the borrowing of funds from the same industry is mainly to solve the need for insufficient temporary reserves, such as the shortfall in temporary positions due to the liquidation of the joint exchange and the sudden need for funds in position scheduling. Therefore, the borrower should also adhere to the short-term principle of borrowing funds. Once the loan is recovered or the deposit is increased, the borrower should be repaid immediately.