The London Interbank Offered Rate (LIBOR) is a benchmark interest rate calculated from estimates submitted by the leading banks in London at which major global banks lend to one another in the international interbank market for short-term loans. The LIBOR is a floating interest rate benchmark used to make adjustments to variable-rate loans and credit.
Reference Definition by OECD: The London Interbank Offered Rate (LIBOR) for deposits, such as the six-month dollar LIBOR. LIBOR is a reference rate for the international banking markets and is commonly the basis on which lending margins are fixed. Thus, an original loan agreement or a rescheduling agreement may set the interest rate to the borrower at six-month dollar LIBOR plus 1.5 percent, with semiannual adjustments for changes in the LIBOR rate. Also, interest rate swap rates are quoted in reference to LIBOR; that is, the quoted rate is the fixed-rate side of the swap because the floating-rate side is LIBOR.
Related Definitions in the Project: The Commercial Definitions
