LIBOR, or the London Interbank Offered Rate, was a benchmark interest rate at which major global banks lent to one another in the international interbank market. It was phased out by the end of 2021 due to scandals and concerns over its reliability and is being replaced by alternative reference rates like SOFR and SONIA.

LIBOR

London Interbank Offered Rate

The benchmark interest rate is a standard rate set by central banks that influences the cost of borrowing and the return on savings, impacting economic activity and inflation. It serves as a reference point for various financial products and helps guide monetary policy decisions to stabilize the economy.

benchmark interest rate

major global banks

international interbank market

phased out

scandals

Concerns over reliability

alternative reference rates

The Secured Overnight Financing Rate (SOFR) is a benchmark interest rate for dollar-denominated derivatives and loans, based on transactions in the U.S. Treasury repurchase market. It serves as a replacement for the London Interbank Offered Rate (LIBOR) and is considered more robust due to being based on actual transactions rather than estimates.

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