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London Interbank Offered Rate

London Interbank Offered Rate (LIBOR)

Definition

An interest rate that is set each business day morning in London by approximately 18 major banks. LIBOR serves as a worldwide benchmark rate that is responsible for determining the interest rates applicable to roughly $300 trillion of consumer and business financial products, including credit cards, car loans, adjustable rate mortgages, municipal interest rate swaps, and corporate loans.

In April 2008, regulators in Europe, the United States, and Japan began investigating reports that a number of major banks colluded to manipulate the LIBOR rate, an action that would add illegally to their profits. Several of the banks later agreed to pay fines and penalties based on information revealed during these investigations. As of November 2013, authorities are continuing to examine the roles of other banks and their directors and officers in conjunction with the manipulation of LIBOR rates.

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