LIBOR

LIBOR, the London Interbank Offered Rate, was a benchmark interest rate for unsecured interbank lending. It indicated the rate at which major global banks were willing to lend to one another in a wholesale market for short-term funds. LIBOR was published for multiple currencies and tenors, ranging from overnight to 12 months, and was produced by the ICE Benchmark Administration (IBA) based in London.

Calculation of LIBOR relied on submissions from a panel of contributing banks. For each currency and tenor, each bank submitted the rate at which it believed it could borrow funds. The published rate was typically the average of these submissions after trimming the highest and lowest values, intended to reduce the influence of outliers. The resulting rates served as reference benchmarks in a wide array of financial products and contracts, including loans, mortgages, and interest rate derivatives such as swaps.

LIBOR came under significant scrutiny following revelations of rate manipulation in the early 2010s. Reforms implemented thereafter strengthened governance, enhanced oversight, and moved toward greater reliance on actual transactions rather than opinion-based submissions. The changes also improved resilience to illiquid market conditions and increased transparency in the rate-setting process.

In the late 2010s and early 2020s, a global transition away from LIBOR accelerated. Market participants began adopting alternate reference rates that are deemed more robust, such as the Secured Overnight Financing Rate (SOFR) in the United States, the Sterling Overnight Index Average (SONIA) in the United Kingdom, the Euro Overnight Index Average (€STR) in the euro area, and the Tokyo Overnight Average Rate (TONA) in Japan. Some LIBOR tenors were published for legacy contracts during a transition period through 2021–2023, but publication for most tenors and currencies has ceased. New contracts increasingly reference these risk-free or rate-based alternatives, with fallback provisions to mitigate LIBOR cessation risk.