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LIBOR
(London Interbank Offered Rate)
LIBOR (London Interbank Offered Rate) was the benchmark interest rate for $400T+ in loans (mortgages, HELOCs, derivatives), set daily by major banks' estimated borrowing costs. Phased out in 2023 after manipulation scandals (fines totaled $9B).
Replaced by SOFR (secured overnight financing rate) in the U.S. and €STR in Europe. Unlike LIBOR's forward-looking term rates, SOFR is backward-looking (actual transaction-based). Transition challenges included legacy contract rewrites (some still reference LIBOR). The FED and ECB led reforms to improve rate transparency post-crisis.
Replaced by SOFR (secured overnight financing rate) in the U.S. and €STR in Europe. Unlike LIBOR's forward-looking term rates, SOFR is backward-looking (actual transaction-based). Transition challenges included legacy contract rewrites (some still reference LIBOR). The FED and ECB led reforms to improve rate transparency post-crisis.