Brief History: LIBOR stands for The London Interbank Offered Rate. Basically, it is the average interest rate at which leading banks borrow funds from other banks in the London market. It is the anticipated interest rate if one bank were to borrow from another bank. (Simplified explanation)
LIBOR is a global "benchmark" and on September 19, 2019 that benchmark for a one year rate was 2.07%. The LIBOR adjusts and the official LIBOR rates (officially known as ICE LIBOR) are announced daily.
Regulators have been calling for a move away from LIBOR as a benchmark for several years.
It is estimated that approximately $200 trillion of financial contracts (like home mortgage rates and corporate loans) have their ‘basis’ on LIBOR.
On the consumerfinance.gov site is an article by Davida Farrar (October 17, 2019) titled “You may have heard that LIBOR is going away…”
But the question is… if LIBOR is no longer used…what “standard” index will be used?
Various agencies, it appears, are working on that problem.
For example: The U.S.Treasury would like LIBOR to be replaced by SOFR. (yes, we all like those acronyms)
SOFR stands for secured overnight financing rate and according to some data the SOFR rate on November 14, 2019 was 1.58% (SOFR adjusts daily, with various percentiles)
For more information about what might replace the LIBOR, go to the consumerfinance.gov website.
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