Friday, October 10, 2008

LIBOR Set by Men in London, NOT by the Market

The British Banking Association sets the London Interbank Offer Rate, the interest rate that banks charge each other for borrowing. The skyrocketing LIBOR is largely blamed for the current credit crunch which is creating the market crash and bank failures.  It's interesting to note that this key rate is set by fiat by a small group of London banking insiders.  It is NOT set by the market.  It is set by men with an agenda.  It is not unreasonable to question whether the skyrocketing LIBOR and its refusal to come back down is not being purposefully set high to engender the crisis.  Something worth thinking about.

Key facts about BBA LIBOR


The BBA LIBOR overnight rate for pounds sterling over the past two days has moved upwards daily:

  • Wednesday 8th August 5.85 per cent
  • Thursday 9th August 6.165 per cent
  • Friday 10th August 6.475 per cent

The Bank of England base rate is currently 5.75 per cent.

3. How Is It Calculated?

The BBA uses Reuters to fix and publish the data daily, usually before 12 noon UK time.

It assembles the interbank borrowing rates from 16 contributor panel banks at 11am, looks at the middle 50 per cent of these rates and uses these to calculate an average, which then becomes that day’s BBA LIBOR rate. This process is followed 150 times to create rates for all 15 maturities (ranging from overnight to 12 months) and all 10 currencies for which a BBA LIBOR rate is quoted.

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