LIBOR: Frequently Asked Questions (CRS Report for Congress)
| Release Date |
July 16, 2012 |
| Report Number |
R42608 |
| Report Type |
Report |
| Authors |
Edward V. Murphy, Specialist in Financial Economics |
| Source Agency |
Congressional Research Service |
Summary:
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. 1) How is LIBOR calculated? 2) Which banks serve on the dollar LIBOR panel? 3) How can a single bank manipulate LIBOR? 4) How did Barclays manipulate LIBOR? 5) How is LIBOR used in the U.S. financial systems? 6) Are there alternatives to LIBOR? 7) Were U.S. policymakers, such as the Federal Reserve Bank of New York, aware of problems with LIBOR?
