LIBOR
AdvancedLIBOR, the London Interbank Offered Rate, was a benchmark interest rate based on estimates submitted by major banks of the rates at which they could borrow from each other, which has now been discontinued.
For decades, LIBOR was one of the most important interest rates in the world. It was published for several currencies and borrowing periods, and was used to set rates on hundreds of trillions of dollars of loans, bonds, mortgages and derivatives.
LIBOR was based on banks' estimates rather than actual transactions. During the late 2000s, it emerged that some banks had manipulated their submissions to benefit their trading positions or to appear financially stronger. The scandal led to large fines and criminal convictions.
Regulators decided to replace LIBOR with benchmarks based on actual transactions, such as SOFR in the United States, SONIA in the United Kingdom and €STR in the euro area. Most LIBOR settings stopped at the end of 2021, the main US dollar settings ended in June 2023, and the last temporary synthetic versions ended in September 2024.
For example, a company with an old loan priced at LIBOR plus 2% would have had its loan switched to a replacement rate, such as SOFR plus an adjustment, during the transition.
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