London Interbank Offered Rate:
The Reserve Bank of India (RBI) recently told banks and other regulated entities to ensure a complete transition away from the London Interbank Offered Rate (LIBOR).
- London Interbank Offered Rate (LIBOR) is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.
- It acts as a benchmark for short-term interest rates.
- It is an indicator of the health of the financial system and provides an idea of the trajectory of impending policy rates of central banks.
- LIBOR is also the basis for consumer loans in countries around the world, so it impacts consumers just as much as it does financial institutions.
- LIBOR calculated is computed for five currencies with seven different maturities ranging from overnight to a year.
- The five currencies for which LIBOR is computed are the Swiss franc, euro, pound sterling, Japanese yen and US dollar.