LIBORs

LIBORs, or London Interbank Offered Rates, are benchmark interest rates at which major global banks are willing to lend to one another on an unsecured basis in the wholesale funding market. They are published for multiple currencies and tenors, ranging from overnight to 12 months, and have historically served as reference rates for a wide range of financial instruments, including loans, bonds, and derivatives.

Calculation and administration: For each currency and tenor, the rate reflects submissions from a panel of contributing banks, which are trimmed for outliers and then averaged to produce a representative figure. The process is overseen by ICE Benchmark Administration (IBA); LIBOR was previously administered by the British Bankers’ Association (BBA). The reliance on bank submissions has been a central feature and a source of concern in past reforms.

Reforms and transition: LIBOR came under intense scrutiny after manipulation allegations in the late 2000s. Regulators and industry groups have pursued reforms to replace LIBOR with more robust benchmark rates known as risk-free rates (RFRs). In many markets, new contracts now reference RFRs such as SOFR in the United States, SONIA in the United Kingdom, €STR in the euro area, SARON in Switzerland, and TONAR in Japan. The transition aims to preserve continuity for existing exposures while reducing future reliance on LIBOR.

Status: The publication of many LIBOR tenors has ended, and LIBOR is no longer widely used for new contracts in most currencies. For legacy USD LIBOR exposures, a temporary mechanism involving a synthetic USD LIBOR rate was introduced to support continued functioning during the transition, after which LIBOR is intended to be retired completely.