Editing Libor (section)

{{Short description|Interest rate benchmark}}
{{About||the personal name|Libor (name)}}
{{Use dmy dates|date=October 2015}}
{{EngvarB|date=October 2015}}
{{Update|date=October 2023}}[[File:Londres 353..jpg|thumb|upright=1.2|Libor gets its name from the [[City of London]].]]
The '''London Inter-Bank Offered Rate''' ('''Libor''' {{IPAc-en|ˈ|l|aɪ|b|ɔː|r}} {{respell|LY|bor}}){{Efn|Usually abbreviated to '''Libor''' or '''LIBOR''', or more officially to '''ICE LIBOR''' (for '''Intercontinental Exchange LIBOR'''). It was formerly known as '''BBA Libor''' (for '''British Bankers' Association Libor''') before the responsibility for the administration was transferred to Intercontinental Exchange.}} was an [[interest rate]] average calculated from estimates submitted by the leading [[Bank|banks]] in [[London]]. Each bank estimated what it would be charged were it to borrow from other banks.<ref>[http://citywire.co.uk/money/qanda-what-is-libor-and-what-did-barclays-do-to-it/a600479/ Q&A: what is Libor and what did Barclays do to it?] {{webarchive|url=http://archive.wikiwix.com/cache/20141030183725/http://citywire.co.uk/money/qanda-what-is-libor-and-what-did-barclays-do-to-it/a600479/ |date=30 October 2014 }} – CityWire 29 June 2012 at 17:05.</ref>{{efn|Note in particular that Libor was an estimated borrowing rate, not an estimated lending rate. The average rate was computed after excluding the highest and lowest quartile of these estimates{{snd}} for much of its history: There were sixteen banks in each panel, so the highest and lowest four were removed.}} It was the primary benchmark, along with the [[Euribor]], for short-term interest rates around the world.<ref>{{cite news | url=http://seattletimes.nwsource.com/html/businesstechnology/2008215959_weblibor30.html | work=The Seattle Times | first=Alan | last=Zibel | title=Q&A: What is Libor, and how does it affect you? | date=30 September 2008 | url-status=live | archive-url=https://web.archive.org/web/20120711032932/http://seattletimes.nwsource.com/html/businesstechnology/2008215959_weblibor30.html | archive-date=11 July 2012 | df=dmy-all }}</ref><ref>{{cite news|title=Barclays fined for attempts to manipulate key bank rates|url=https://www.bbc.co.uk/news/business-18612279|publisher=[[BBC News]]|access-date=27 June 2012|date=27 June 2012|url-status=live|archive-url=https://web.archive.org/web/20120627143638/http://www.bbc.co.uk/news/business-18612279|archive-date=27 June 2012|df=dmy-all}}</ref> Libor was phased out at the end of 2021, with market participants encouraged to transition to [[risk-free interest rate]]s such as [[SOFR]] and [[SARON]].<ref>{{cite web |url=https://www.fca.org.uk/news/speeches/the-future-of-libor|title=The future of LIBOR|date=26 July 2017 |publisher=UK Financial Conduct Authority (FCA) |access-date=16 July 2019 }}</ref><ref>{{cite web |url=https://www.fca.org.uk/news/speeches/libor-preparing-end|title=LIBOR: preparing for the end|date=15 July 2019 |publisher=UK Financial Conduct Authority (FCA) |access-date=16 July 2019 }}</ref><ref>{{cite web |url=https://www.bankofengland.co.uk/markets/transition-to-sterling-risk-free-rates-from-libor|title=Transition from LIBOR to risk-free rates|publisher=Bank of England}}</ref>

LIBOR was discontinued in the summer of 2023. The last rates were published on 30 June 2023 before 12:00 pm UK time. The 1 month, 3 month, 6 month, and 12 month Secured Overnight Financing Rate ([[SOFR]]) is its replacement.<ref>{{cite news
   |url=https://www.forbes.com/advisor/investing/what-is-libor
   |title=What Is Libor And Why Is It Being Abandoned?
   |author=Miranda Marquit |author2=Benjamin Curry |date=September 6, 2022 |access-date=October 23, 2022}}</ref><ref>{{citation
   |url=https://www.consumerfinance.gov/about-us/blog/the-libor-index-for-adjustable-rate-loans-is-being-discontinued-heres-what-to-watch-for
|title=The LIBOR index for adjustable-rate loans is being discontinued
|quote=The United Kingdom financial regulator that oversees LIBOR has announced that they'll discontinue the index by June 2023.
|date=December 7, 2021}}</ref><ref>{{Cite news |last1=Mccrank |first1=John |last2=Chavez-Dreyfuss |first2=Gertrude |date=2023-06-30 |title=As the Libor era ends, market participants hope for 'crickets' |language=en |work=Reuters |url=https://www.reuters.com/markets/libor-era-ends-market-participants-hope-crickets-2023-06-30/ |access-date=2023-06-30}}</ref> In July 2023, the [[International Organization of Securities Commissions]] (IOSCO) said four unnamed [[United States dollar|dollar]]-denominated alternatives to LIBOR, known as "credit-sensitive rates", had "varying degrees of vulnerability" that might appear during times of market stress.<ref>{{Cite news |last=Jones |first=Huw |date=2023-07-03 |title=Curb use of dollar Libor alternatives to Fed rate, says watchdog |language=en |work=Reuters |url=https://www.reuters.com/markets/rates-bonds/curb-use-dollar-libor-alternatives-fed-rate-says-watchdog-2023-07-03/ |access-date=2023-07-03}}</ref>

Libor rates were calculated for five currencies and seven borrowing periods, ranging from [[Overnight rate|overnight]] to one year, and were published each business day by [[Thomson Reuters]].<ref name="ice">{{cite web |url=https://www.theice.com/iba/libor |title=ICE Benchmark Administration (IBA) ICE LIBOR |publisher=IntercontinentalExchange |access-date=6 April 2015 |url-status=live |archive-url=https://web.archive.org/web/20150402110028/https://www.theice.com/iba/libor |archive-date=2 April 2015 |df=dmy-all }}</ref> Many [[Financial institution|financial institutions]], [[mortgage]] lenders, and [[credit card]] agencies set their own rates relative to it. At least $350 [[Orders of magnitude (numbers)#1012|trillion]] in [[Derivative (finance)|derivatives]] and other financial products were tied to Libor.<ref>{{cite news | url=https://www.nytimes.com/interactive/2012/07/10/business/dealbook/behind-the-libor-scandal.html | work=The New York Times | title=Behind the Libor Scandal | date=10 July 2012 | url-status=live | archive-url=https://web.archive.org/web/20120712173602/http://www.nytimes.com/interactive/2012/07/10/business/dealbook/behind-the-libor-scandal.html | archive-date=12 July 2012 | df=dmy-all }}</ref>

In June 2012, multiple criminal settlements by [[Barclays Bank]] revealed significant [[fraud]] and [[collusion]] by [[British Bankers' Association|member banks]] connected to the rate submissions, leading to the [[Libor scandal]].<ref name="cftc" /><ref name="usdoj" /><ref name="fsa" /> The British Bankers' Association said on 25 September 2012 that it would transfer oversight of Libor to UK regulators, as proposed by [[Financial Services Authority]] managing director [[Martin Wheatley]]'s independent review recommendations.<ref name=BloombergMain /> Wheatley's review recommended that banks submitting rates to Libor must base them on actual inter-bank deposit market transactions and keep records of those transactions, that individual banks' Libor submissions be published after three months, and recommended criminal sanctions specifically for manipulation of benchmark interest rates.<ref name=Blakes /> Financial institution customers may experience higher and more volatile borrowing and [[Hedge (finance)|hedging]] costs after implementation of the recommended reforms.<ref name= Brettell /> The UK government agreed to accept all of the Wheatley Review's recommendations and press for legislation implementing them.<ref name="Thomson">Ainsley Thomson (17 October 2012) [http://www.foxbusiness.com/news/2012/10/17/uk-treasury-minister-government-accepts-recommendations-wheatley-libor-review/ "UK Treasury Minister: Government Accepts Recommendations Of Wheatley Libor Review In Full"]{{dead link|date=December 2017 |bot=InternetArchiveBot |fix-attempted=yes }} ''Dow Jones Newswires / Fox Business''</ref>

Significant reforms, in line with the Wheatley Review, came into effect in 2013 and a new administrator took over in early 2014.<ref name="reforms">{{cite news|url=http://www.cityam.com/article/libor-now-has-new-administrator-our-reforms-have-gone-much-further|title=Libor now has a new administrator – but our reforms have gone much further|author=Anthony Browne, chief executive of the British Bankers' Association|publisher=City A.M.|date=11 July 2013|access-date=20 July 2013|url-status=dead|archive-url=https://web.archive.org/web/20131104030713/http://www.cityam.com/article/libor-now-has-new-administrator-our-reforms-have-gone-much-further|archive-date=4 November 2013|df=dmy-all}}</ref><ref>{{cite web|url=http://www.bbalibor.com/news|title=BBA Libor Benchmark Administrator's News|publisher=The British Bankers' Association|access-date=25 July 2013|url-status=live|archive-url=https://web.archive.org/web/20130622092537/http://www.bbalibor.com/news|archive-date=22 June 2013|df=dmy-all}}</ref> The [[British government]] regulated Libor through [[criminal law|criminal]] and [[regulatory law|regulatory]] laws passed by [[Parliament of the United Kingdom|Parliament]].<ref name="UK Policy">{{cite web|url=https://www.gov.uk/government/policies/creating-stronger-and-safer-banks/supporting-pages/reforming-the-way-interest-rates-are-set-for-loans-between-banks-known-as-libor |title=UK Government Policy: Creating stronger and safer banks |publisher=UK Government |date=17 July 2013 |access-date=21 July 2013 |url-status=dead |archive-url=https://web.archive.org/web/20131017223600/https://www.gov.uk/government/policies/creating-stronger-and-safer-banks/supporting-pages/reforming-the-way-interest-rates-are-set-for-loans-between-banks-known-as-libor |archive-date=17 October 2013 }}</ref><ref>{{cite web|url=https://publications.parliament.uk/pa/cm201213/cmgeneral/deleg4/130226/130226s01.htm|title=UK Parliament General Committee Debates|publisher=UK Parliament|date=27 February 2013|access-date=22 July 2013|url-status=live|archive-url=https://web.archive.org/web/20130707030654/http://www.publications.parliament.uk/pa/cm201213/cmgeneral/deleg4/130226/130226s01.htm|archive-date=7 July 2013|df=dmy-all}}</ref> In particular, the [[Financial Services Act 2012]] brought Libor under UK regulatory oversight and created a criminal offence for knowingly or deliberately making false or misleading statements relating to benchmark-setting.<ref name="reforms" /><ref name="FSBillPR">{{cite press release|url=https://www.gov.uk/government/news/financial-services-bill-receives-royal-assent|title=Financial Services Bill receives Royal Assent|date=19 December 2012|access-date=27 July 2013|publisher=UK Government|url-status=live|archive-url=https://web.archive.org/web/20140113161451/https://www.gov.uk/government/news/financial-services-bill-receives-royal-assent|archive-date=13 January 2014|df=dmy-all}}</ref>