LIBOR: No More

September 6, 2017

Businesses and investors around the world will feel the impact as the transition away from LIBOR unfolds.

  • LIBOR is the most commonly used reference rate for a variety of interest-rate products.
  • The U.K. Financial Conduct Authority, which calculates LIBOR, announced they may no longer compel banks to make LIBOR submissions beyond 2021. As a result, LIBOR may cease to exist beyond that point.
  • Businesses and investors around the world will feel the impact as the transition away from LIBOR unfolds.

The London Interbank Offered Rate, or LIBOR, is arguably one of the most influential data points in financial markets. To put it precisely, “LIBOR provides an indication of the average rate at which a LIBOR contributor bank can obtain unsecured funding in the London interbank market for a given period, in a given currency.”1

In plainer English, LIBOR is the average interest rate that large global banks charge to lend money to other banks. It is also the rate used when determining adjustable-rate mortgages in America, as well as serving as a guide for various other financial products and decisions worldwide. Whether indirectly through its effect on the performance of bonds held in a mutual fund or directly through the interest rates associated with certain types of mortgage or student-loan products, chances are you have crossed paths with LIBOR.

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