Libor

The London Inter-Bank Offered Rate (Libor /ˈlaɪbɔːr/ LY-bor) was an <a href="/facts/Interest_rate/Nb4JN7gR">interest rate</a> average calculated from estimates submitted by the leading <a href="/facts/Bank/l7VsKwas">banks</a> in <a href="/facts/London/KozCCsy9">London</a>. Each bank estimated what it would be charged were it to borrow from other banks. It was the primary benchmark, along with the <a href="/facts/Euribor/HPV18Khc">Euribor</a>, for short-term interest rates around the world. Libor was phased out at the end of 2021, with market participants encouraged to transition to <a href="/facts/Risk-free_interest_rate/BJprxn2e">risk-free interest rates</a> such as <a href="/facts/SOFR/dhVnbMTv">SOFR</a> and <a href="/facts/SARON/ILzGfCIN">SARON</a>.
LIBOR was discontinued in the summer of 2023. The last rates were published on 30 June 2023 before 12:00 pm UK time. The 1 month, 3 month, 6 month, and 12 month Secured Overnight Financing Rate (<a href="/facts/SOFR/dhVnbMTv">SOFR</a>) is its replacement. In July 2023, the <a href="/facts/International_Organization_of_Securities_Commissions/ypJLo8bd">International Organization of Securities Commissions</a> (IOSCO) said four unnamed <a href="/facts/United_States_dollar/naEEDUhC">dollar</a>-denominated alternatives to LIBOR, known as "credit-sensitive rates", had "varying degrees of vulnerability" that might appear during times of market stress.
Libor rates were calculated for five currencies and seven borrowing periods, ranging from <a href="/facts/Overnight_rate/rMcQTGtM">overnight</a> to one year, and were published each business day by <a href="/facts/Thomson_Reuters/GPIlfqa2">Thomson Reuters</a>. Many <a href="/facts/Financial_institution/MMdhY0g9">financial institutions</a>, <a href="/facts/Mortgage/EtGHG9q3">mortgage</a> lenders, and <a href="/facts/Credit_card/7pKSB5LD">credit card</a> agencies set their own rates relative to it. At least $350 <a href="/facts/Orders_of_magnitude_(numbers)/uu2o1hk2">trillion</a> in <a href="/facts/Derivative_(finance)/jx4CbakW">derivatives</a> and other financial products were tied to Libor.
In June 2012, multiple criminal settlements by <a href="/facts/Barclays_Bank/2M992GXz">Barclays Bank</a> revealed significant <a href="/facts/Fraud/VyU68aBy">fraud</a> and <a href="/facts/Collusion/byEmG0YW">collusion</a> by <a href="/facts/British_Bankers%2527_Association/v3oEdNyU">member banks</a> connected to the rate submissions, leading to the <a href="/facts/Libor_scandal/Tw2gJ2NH">Libor scandal</a>. The British Bankers' Association said on 25 September 2012 that it would transfer oversight of Libor to UK regulators, as proposed by <a href="/facts/Financial_Services_Authority/Nj1GjuCE">Financial Services Authority</a> managing director <a href="/facts/Martin_Wheatley/18ALTUjm">Martin Wheatley</a>'s independent review recommendations. Wheatley's review recommended that banks submitting rates to Libor must base them on actual inter-bank deposit market transactions and keep records of those transactions, that individual banks' Libor submissions be published after three months, and recommended criminal sanctions specifically for manipulation of benchmark interest rates. Financial institution customers may experience higher and more volatile borrowing and <a href="/facts/Hedge_(finance)/PKVBgUHb">hedging</a> costs after implementation of the recommended reforms. The UK government agreed to accept all of the Wheatley Review's recommendations and press for legislation implementing them.
Significant reforms, in line with the Wheatley Review, came into effect in 2013 and a new administrator took over in early 2014. The <a href="/facts/British_government/3zLlUWbx">British government</a> regulated Libor through <a href="/facts/Criminal_law/XXfgv9as">criminal</a> and <a href="/facts/Regulatory_law/wHFlMJP8">regulatory</a> laws passed by <a href="/facts/Parliament_of_the_United_Kingdom/7bFbPI9g">Parliament</a>. In particular, the <a href="/facts/Financial_Services_Act_2012/yd4Gan2F">Financial Services Act 2012</a> brought Libor under UK regulatory oversight and created a criminal offence for knowingly or deliberately making false or misleading statements relating to benchmark-setting.

Libor open-in-new

Libor