What is LIBOR?
LIBOR is short for London Interbank Offered Rate. The Intercontinental Exchange (ICE) is responsible for administering the tariff. Originally, LIBOR was used by banks to determine the interest rate they would use to lend to each other. Over time, its focus broadened.
LIBOR is an interest rate that major global banks use as a benchmark when lending to each other. Since late 2021, LIBOR has been phased out, a process that may impact some consumers.
History of LIBOR rates
Minos Zombanakis is credited with creation of LIBOR. He was looking to find an interest rate for an $80 million loan from Manufacturers Hanover to the Iranian Shah in 1969. The loan was, and today’s LIBOR index still is, based on the financing costs of several reference banks.
Banks have started using LIBOR as an index. It became formal in 1986 when the British Bankers’ Association (BBA) took over. The index has been reported for the US dollar, British pound and Japanese yen from this year.
We’ll go into more detail below, but LIBOR was the subject of a major rate-fixing scandal that came to light in 2008. One consequence of this was a change in administration. From January 31, 2014, administrative control of the LIBOR index has been moved from the BBA to the ICE Benchmark Administration (IBA) group. They have had control ever since.