London Inter-bank Offer Rate meaning

London Inter-bank Offer Rate (LIBOR) is the former interbank interest benchmark widely used in loan agreements, floating rate notes and derivatives to set variable interest, intended to reflect the rate at which major London banks would lend to each other. In practice, contracts defined LIBOR by reference to a screen rate published by ICE Benchmark Administration, with fallbacks if unavailable. LIBOR is not a statutory definition but a benchmark within the UK and EU/EEA Benchmarks Regulation regimes. Publication of sterling, euro, Swiss franc and yen LIBOR ceased at end-2021 and US dollar LIBOR ceased in 2023; temporary “synthetic LIBOR” for certain legacy contracts has now also ended. Usage and transition approaches are broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland. For new and amended transactions, market practice is to avoid LIBOR and use near risk-free rates with robust fallbacks, typically SONIA (sterling), SOFR (US dollars) and, for euro exposures, €STR or reformed EURIBOR, often with a credit adjustment spread. For legacy contracts, practitioners implement transition via contractual amendments or protocols (for derivatives, the ISDA IBOR Fallbacks), or rely on benchmark legislation and regulator-directed solutions where available.