▁formula ▁depends ▁on ▁the ▁type ▁of ▁such ▁rate . ▁ ▁The ▁index ▁rate ▁is ▁typically ▁the ▁rate ▁for ▁over night ▁un sec ured ▁l ending ▁between ▁banks , ▁for ▁example ▁the ▁Federal ▁funds ▁rate ▁or ▁SO FR ▁for ▁US ▁dollars , ▁€ STR ▁( former ly ▁E ON IA ) ▁for ▁Eu ros ▁or ▁S ON IA ▁for ▁ster ling . ▁The ▁fixed ▁rate ▁of ▁O IS ▁is ▁typically ▁an ▁interest ▁rate ▁considered ▁less ▁ris ky ▁than ▁the ▁corresponding ▁inter bank ▁rate ▁( LI B OR ) ▁because ▁there ▁is ▁limited ▁counter party ▁risk . ▁ ▁The ▁L IB OR – O IS ▁spread ▁is ▁the ▁difference ▁between ▁L IB OR ▁and ▁the ▁O IS ▁rates . ▁The ▁spread ▁between ▁the ▁two ▁rates ▁is ▁considered ▁to ▁be ▁a ▁measure ▁of ▁health ▁of ▁the ▁bank ing ▁system . ▁It ▁is ▁an ▁important ▁measure ▁of ▁risk ▁and ▁liquid ity ▁in ▁the ▁money ▁market , ▁considered ▁by ▁many , ▁including ▁former ▁US ▁Federal ▁Reserve ▁chairman ▁Alan ▁Gre ens pan , ▁to ▁be ▁a ▁strong ▁indicator ▁for ▁the ▁relative ▁stress ▁in ▁the ▁money ▁mark ets . ▁A ▁higher ▁spread ▁( high ▁Lib or ) ▁is ▁typically ▁interpreted ▁as ▁indic ation ▁of ▁a ▁decre ased ▁willing ness ▁to ▁l end ▁by ▁major ▁banks , ▁while ▁a ▁lower ▁spread ▁indicates ▁higher ▁liquid ity ▁in ▁the ▁market . ▁As ▁such , ▁the ▁spread ▁can ▁be ▁viewed ▁as ▁indic ation ▁of ▁banks ' ▁per ception ▁of ▁the ▁credit worth iness ▁of ▁other ▁financial ▁institutions ▁and ▁the ▁general ▁avail ability ▁of ▁funds