This report answers several common questions regarding the London Interbank Offer Rate (LIBOR), an index representing prevailing interest rates in London money markets. Recently, the Commodity Futures Trading Commission (CFTC) and the U.S. Department of Justice (DOJ) reached settlements with Barclays, in which the British bank admitted submitting false responses to the survey used to calculate LIBOR and the Euro Interbank Offer Rate (EURIBOR) to manipulate the indexes. How is LIBOR Calculated? Which Banks Serve on the Dollar LIBOR Panel? How is LIBOR Used in the U.S. Financial System? Are There Alternatives to LIBOR? Can a Single Reporting Bank Manipulate a LIBOR Index? In Its Admissions, How Did Barclays Manipulate LIBOR? Were U.S. Policymakers Aware of Problems with LIBOR? The Federal Reserve Bank of New York (FRBNY) reportedly raised concerns with Barclays about its LIBOR responses.
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?