LIBOR

LIBOR Meaning:
In deposit terminology, the term LIBOR refers to the London InterBank Offered Rate. In practice, LIBOR acts as a benchmark interest rate which banks in the Interbank market charge each other for loans of unsecured funds. LIBOR is fixed once every business day in London by the British Bankers Association.

LIBOR Example:
For example, the LIBOR daily fix began in January of 1986 and is currently the world’s primary benchmark for short term interest rates. The LIBOR reference rate is relied upon by banks and other financial institutions in the United States, the United Kingdom, Canada and Switzerland to base their short term interest rates upon. The LIBOR is also the basis for many international loans, with especially creditworthy borrowers able to borrow at LIBOR plus a spread of a few basis points. The rate is calculated and published daily by the Reuters news wire for the British Bankers Association, and it is generally calculated at 11:00 am London time and released at approximately 11:45 am. The LIBOR rates are computed for ten different currencies, with the maturity dates or terms for LIBOR rates ranging from overnight to five years.