Libor, long the most important number in finance, dies at 52
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Re: Libor, long the most important number in finance, dies at 52
#2Paywalled
Re: Libor, long the most important number in finance, dies at 52
#3TLDR;
“Libor was the interest rate that banks themselves had to pay, so it offered a convenient base line for the rates they charged customers who wanted to borrow cash to buy a home or issue a security to finance a business expansion.”
“Because Libor relied on self-reported estimates, it was possible for a bank to submit a rate that was artificially high or low, thus making certain financial holdings more profitable.”
“Libor could no longer be used to calculate new deals as of Dec. 31 — more than six years after a former UBS trader was jailed for his efforts to manipulate it and others were fired, charged or acquitted.”
Re: Libor, long the most important number in finance, dies at 52
#4Re: Libor, long the most important number in finance, dies at 52
#5The vestiges of the Bretton Woods system.
Re: Libor, long the most important number in finance, dies at 52
#6I have an adjustable rate mortgage based on LIBOR and the lender still has not said what they plan to do. The presumed replacement rate (SOFR) seems to be pegged near 0% which would be good.
Re: Libor, long the most important number in finance, dies at 52
#7Mainly was LIBOR used in the EuroDollar market?
Anyways, it seems like there is a need for a system that is transparent, immutable, and accessible to everyone... Crypto? Matt Damon is calling.
Cheers
Re: Libor, long the most important number in finance, dies at 52
#8When I worked in investment banking, all our debt models were pegged to LIBOR. Rest In Peace! God bless the IB analysts scrambling to plug their models with replacement rates and weird hardcodes!
Re: Libor, long the most important number in finance, dies at 52
#9What Is Libor And Why Is It Being Abandoned? - https://www.forbes.com/advisor/investing/what-is-libor/
Re: Libor, long the most important number in finance, dies at 52
#10> In 1986, at age 17, it hit the big time: Libor was taken in by the British Bankers Association, a trade group described later by The New York Times as a “club of gentlemen bankers.”
What are the chances that this "club of gentlemen bankers" always intended to manipulate Libor to some extent?
I know finance and banking is very complicated; maybe someone will come along who happens to have been a banker in London in 1986 and will set me straight. Otherwise I find it hard to limit my cynicism when enormous amounts of money are involved.