London Interbank Offered Rate

London Interbank Offered Rate

A short-term interest rate often quoted as a 1,3,6-month rate for U.S.dollars.

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London interbank offered rate (LIBOR)

The basic short-term rate of interest in the Eurodollar market and the rate to which many Eurodollar loans and deposits are tied. The LIBOR is similar in concept to that of the prime rate in the United States except that it is less subject to individual bank management.

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London Interbank Offer Rate

The interest rate participating banks offer to other banks for loans on the London market. LIBOR is the most widely used benchmark for short term interest rates in the world, primarily because most of the world's largest borrowers borrow money on the London market. Because it is so prominent, it is often used in other transactions, such as swaps. For example, an interest rate swaps may give the floating rate as "LIBOR +/- X base points." It is set each day by the British Bankers Association, which calculates it by averaging short term, inter-bank, deposit interest rates among the most creditworthy banks. See also: EURIBOR.

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London Interbank Offered Rate

See LIBOR.

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London Interbank Offered Rate (LIBOR)

What Does London Interbank Offered Rate (LIBOR) Mean?

An interest rate at which banks borrow funds from other banks in the London interbank market; the LIBOR is fixed on a daily basis by the British Bankers' Association and derived from a filtered average of the world's most creditworthy banks' interbank deposit rates for larger loans with maturities between overnight and a full year.

Investopedia explains London Interbank Offered Rate (LIBOR)

The LIBOR is the world's most widely used benchmark for shortterm interest rates. It is important because it is the rate at which the world's most preferred borrowers are able to borrow money. It is also the rate on which rates for less preferred borrowers are based. For example, a multinational corporation with a very good credit rating may be able to borrow money for one year at LIBOR plus four or five points. Countries that rely on the LIBOR for a reference rate include the United States, Canada, Switzerland, and the United Kingdom.

Related Terms:
• Euro LIBOR
• Interest Rate
• Interbank Rate
• Singapore Interbank Offered Rate—SIBOR
• Swap