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Monday, July 30, 2012

LIBOR: Frequently Asked Questions

Edward V. Murphy
Specialist in Financial Economics

The London Interbank Offer Rate (LIBOR) is an estimate of prevailing interest rates in London money markets. Barclays, a British bank that serves on the panel responding to the LIBOR survey, recently admitted submitting false responses to manipulate the index (and attempting to manipulate a similar index, the Euro Interbank Offer Rate [EURIBOR]). The Commodity Futures Trading Commission (CFTC) and the U.S. Department of Justice (DOJ) reached settlements with Barclays in which the bank agreed to admit fault and pay a large fine.

This report answers several frequently asked questions.

  • How is LIBOR calculated? 
  • Which banks serve on the dollar LIBOR panel? 
  • How can a single bank manipulate LIBOR? 
  • How did Barclays manipulate LIBOR? 
  • How is LIBOR used in the U.S. financial systems? 
  • Are there alternatives to LIBOR? 
  • Were U.S. policymakers, such as the Federal Reserve Bank of New York, aware of problems with LIBOR?
Date of Report: July 16, 2012
Number of Pages: 9
Order Number: R42608
Price: $19.95

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