What is LIBOR

Most of you would have heard about the ongoing LIBOR saga that has engulfed the financial landscape recently? Here is a brief explanation for those who are unsure as to what it stands for and the significance of it (cut and pasted from www.tfmetalsreport.com):

What Is LIBOR?

Submitted by OutLookingIn on July 5, 2012 - 4:04pm.

Some Know. Many do not.

LIBOR = London Inter Bank Offered Rate.

The LIBOR is the interest rate guide at which banks lend to each other. Many other interest rates are calculated using the LIBOR, such as mortgage rates, forward rate agreements, futures contracts, interest rate swaps, floating rate notes, syndicated loans, currencies, (especially the US dollar) and over-the-counter derivatives.

Every day, the British Bankers Association (BBA) surveys a panel of internationally active banks, asking them to provide the rates at which they could borrow "reasonable amounts" in a particular currency and maturity at 11:00 GMT. The BBA then eliminates the highest and lowest quartiles of the distribution and averaging the remaining quotes, to arrive at the LIBOR fix rate.

Around $350 trillion of lending and derivatives is priced of LIBOR. If misconduct by banks caused LIBOR to increase by a mere one tenth of one basis point (0.001%), this amounts to $35 billion a year in extra interest.

Barkleys, RBS and the Bof E are just the tip of the iceberg. More revelations to come.

Watch the LIBOR over this next month as it is now under the global financial microscope, as rates will invariably  rise, which is not good for the fragile global economy that is showing concrete signs of slowing down.