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What Is Libor

LIBOR (London Interbank Offered Rate) was a key benchmark for global financial products, but was manipulated by banks from 2005 to 2009 for profit and stability. The scandal came to light in 2012 when Barclays admitted to rigging LIBOR, resulting in significant fines and reforms. New benchmark rates like SOFR and SONIA have since been introduced to enhance transparency and prevent future manipulation.

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19 views1 page

What Is Libor

LIBOR (London Interbank Offered Rate) was a key benchmark for global financial products, but was manipulated by banks from 2005 to 2009 for profit and stability. The scandal came to light in 2012 when Barclays admitted to rigging LIBOR, resulting in significant fines and reforms. New benchmark rates like SOFR and SONIA have since been introduced to enhance transparency and prevent future manipulation.

Uploaded by

infinitytrading009
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

What is LIBOR?

LIBOR (London Interbank Offered Rate) is an average interest rate set daily, based on what major
banks in London charge each other for short-term loans.

It was a key benchmark for global financial products like loans, mortgages, and derivatives.

The Scandal

From 2005 to 2009, some banks manipulated LIBOR by submitting false interest rates.

Reasons for manipulation:

To profit from trades linked to LIBOR.

To appear more financially stable during uncertain times.

Key Event

In 2012, Barclays admitted to rigging LIBOR, leading to a £290 million fine.

Other banks and individuals, like trader Tom Hayes, faced fines and jail time.

Reforms

New benchmark rates like SOFR and SONIA were introduced to prevent future manipulation.

These are based on real market transactions, ensuring transparency.

Impact

The scandal exposed weaknesses in financial systems and led to global reforms in benchmark rate
calculation.

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