What is the London Interbank Mean Rate?

The London interbank mean rate refers to an interest rate used in the mid-market especially in the interbank markets of London. The rate is determined by calculating the average LIBOR and LIBID rate. The LIBID which refers to the London Interbank Bid Rate is the rate at which the banks that use eurocurrency makes their financial bids. In other words, it is the rate at which banks that trade in eurocurrency are willing to are willing to borrow funds from other banks. On the other hand, LIBOR refers to the rate at which the lending banks are willing to give out finances to the borrowing banks. The LIBOR depends on the rates that are fixed by the British Bankers` Association while the LOIBID is not subjected to any control by any authority or government. Besides, the alternative rates to the LIBOR and LIBID can be used for lending and borrowing in the Intermarket. The interbank rates depict the average borrowing and lending rate of the interbank

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How Does London Interbank Mean Rate Work?

When lending out finances, the five major London banks use the LIBOR average rate to lend a given amount of finance to the lenders for a given period of time especially three or six months. The LIBOR is used as the benchmark rate that is used by the lending institutions to set interest rate for financial instruments and adjustable loan rates. The LIBOR is connected to the options trading exchange, and it is considered to be the leading feature of the Europe interbank markets. The London International Financial Futures Exchange was established in 1982 following the increase in financial trading. Ten years later, the London Traded Options Market (LTOM) emerged which changed the name but maintained similar abbreviation.Moreover, the LIBID and LIBOR are commonly used by the banks as the reference rate in the London interbank market, which is a large London`s money market that gives the banks an opportunity to exchange their currency either directly or indirectly through various platforms such as electronic trading platforms. The most common currency used in the exchange market is the US dollar. The trade mostly uses the term eurocurrency which refers to the dollars that are deposited in the banks outside US-UK, the Europe. The rates are determined daily and made available to the traders in the market.Differed from the LIBID that is not controlled by any authority, LIBOR is controlled and fixed daily the rate is published at around 6:45 a.m. EST (11:45 a.m. in London) by the IBA. In conclusion, the London Interbank Mean Rate (LIMEAN) is the mean rate between the LIBID and the LIBID and mostly used to determine the spread between the two rates. The average rate is also applied by the financial institutions to determine the borrowing and lending transactions in the mid-rate market.