London Interbank Offered Rate (LIBOR)

In News 

(LIBOR) rose for the fourth straight session, rising roughly 2.5 basis points to 2.83229%, the highest since November 2008. 

What Is London Interbank Offered Rate (LIBOR)?

• It is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.
• It serves as a globally accepted key benchmark interest rate that indicates borrowing costs between banks. 
• Administered by
  • the Intercontinental Exchange, which asks major global banks how much they would charge other banks for short-term loans.
• Calculation of rate 
  • The rate is calculated using the Waterfall Methodology, a standardised, transaction-based, data-driven, layered method.
• Replacement
  • It has been subject to manipulation, scandal, and methodological critique, making it less credible today as a benchmark rate.
  • It is being replaced by the Secured Overnight Financing Rate (SOFR) on June 30, 2023, with phase-out of its use beginning after 2021.