London Interbank Bid Rate - Explained
What is the London Interbank Bid Rate?
Written by J. Mance Gordon
Updated at April 17th, 2022
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Table of Contents
What is the London Interbank Bid Rate?How is the the London Interbank Bid Rate Used?What is the London Interbank Bid Rate?
The London Interbank Bid Rate (Libid) is the amount of interest London banks are willing to pay on money borrowed from other banks while the London Interbank Offered Rate (Libor) is the amount of interest charged by a bank on money it lends to other banks. Libor is calculated and published by Intercontinental exchange and used only on the interbank lending market. Limean is the average of Libor and Libid.
Back to:BANKING, LENDING, & CREDIT INDUSTRY
How is the the London Interbank Bid Rate Used?
LIBOR is the amount of interest charged by a bank on money it lends to other banks in a specific currency for a certain amount of time. Although, there are actually 35 rates issued every day, the standard rates is calculated for five currencies, the Swiss Franc, the Euro, the Pound Sterling, the US dollar and the Japanese Yen. The ICE Benchmark Administration (IBA) is responsible for fixing and issuing the Libor while the Libid, though also issued daily has no such correspondent. For a variety of global financial instruments such as short term futures contracts, forward rate agreements, interest rate swaps and currency options, the Libor and Libid are used as the most important reference rates. As a key driver in the Eurodollar market, it serves as the basis for banks retail products and is derived from a filtered average of the rates charged for institutional loans with different maturity periods.