What is the LIBOR Rate?
The London Interbank Offered Rate is the short-term loan interest rate between banks in the European money market. There are two interest rates for interbank lending: the interest rate for interbank lending, which indicates that the bank is willing to borrow; and the interest rate for interbank lending, which indicates that the bank is willing to lend. Comparing the borrowing and borrowing rates of the same bank, the borrowing rate is always less than the borrowing rate, and the difference is the bank's benefit. This interest rate has now become the basis for most floating interest rates in the international financial market, with banks raising funds from the market for refinancing financing costs. The London Interbank Offered Rate negotiated in the loan agreement is usually the average interest rate quoted by several designated reference banks at a specified time (usually 11:00 am London time). [1]
London Interbank Offered Rate
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- The London Interbank Offered Rate is the short-term loan interest rate between banks in the European money market. There are two interest rates for interbank lending: the interest rate for interbank lending, which indicates that the bank is willing to borrow; and the interest rate for interbank lending, which indicates that the bank is willing to lend. Comparing the borrowing and borrowing rates of the same bank, the borrowing rate is always less than the borrowing rate, and the difference is the bank's benefit. This interest rate has now become the basis for most floating interest rates in the international financial market, with banks raising funds from the market for refinancing financing costs. The London Interbank Offered Rate negotiated in the loan agreement is usually the average interest rate quoted by several designated reference banks at a specified time (usually 11:00 am London time). [1]
- The London interbank market began to be a market for short-term sterling transactions between banks to adjust for insufficient positions. After the 1960s, with the increase in short-term capital activities between banks in the financial sector in London, the interbank sterling The market began to replace the discount market and became the main venue for financing in the London banking sector. The London Interbank Offered Rate has become the main basis for calculating interest in lending activities in the London financial market.
- With the expansion of international financial business, the business quickly expanded to European dollars and other European currencies, forming a "European currency wholesale market". The London Interbank Offered Rate is the borrowing rate for these currencies.
- In the future, with the establishment of the European dollar market and other European currency markets, the development of international syndicated syndicated loans and various bill markets, the London Interbank Offered Rate has been widely used in international credit business and has become a key interest rate in the international financial market. At present, financial markets and overseas financial centers in many countries and regions have set their own interest rates based on this interest rate.
- The interest rate of each currency is determined by the supply and demand of market funds, and at the same time, it has a close relationship with the domestic interest rate of the currency. As the basic interest rate of the international financial market, the London Interbank Offered Rate is the standard or basis for the interest rate level of the financial market in many countries and regions. The general approach is: the deposit interest rate is reduced by a few percentage points from the borrowing rate, and the loan is increased by a few percentage points.
- The term of the interbank rate is overnight, 7 days, 1 month, 3 months, 6 months, 1 year. The interest rate of more than 1 year is based on the 3-month or 6-month interbank rate. A certain rate of interest increase is generally between 0.25 and 1.75%, and adjusted within the agreed period. There are hundreds of banks operating European currency business in the London financial market, but there are only more than 30 major banks that can handle the London Interbank Offered Rate, and other banks are their customers. bank.
- It is customary to report its own borrowing rate at 11 am every working day, usually two prices are quoted: the borrowing rate and the borrowing rate. The difference between the two is very small, usually only 0.25 to 0.5%. The quoted interest rates of the major banks are not necessarily the same, and generally differ by 0.0625 ~ 0.125%, so the determination of a specific borrowing interest rate may have room for bargaining, or be calculated based on the average level of the quoted prices of each bank. Due to the different terms, types of currencies, and creditworthiness of various borrowers on the European money market, there are differences in interest rates in each market and even each business, which inevitably makes arbitrage and arbitrage activities very active. [2]
- Libor, as one of the most important benchmark interest rates in the world, affects a large number of swaps and
- More than 20 institutions were investigated, including large and well-known financial institutions such as Citi, Deutsche Bank, HSBC, JP Morgan Chase, RBS (Royal Bank of Scotland), Lloyds, UBS and many more. Barclays is the first bank to actively cooperate with regulators to reach a settlement and accept fines.
- On June 27, 2012, Barclays announced that it had reached an agreement with British and American regulators over the alleged manipulation of Libor, and Barclays would pay a total of 290 million pounds (450 million US dollars) in fines to calm the related investigations. [3]