What is LIBOR?

Libor stands for the London Interbank Offered Rate and is the rate of interest at which banks borrow funds from each other, in marketable size, in the London interbank market.

What is BBA LIBOR?

BBA LIBOR is the most widely used "benchmark" or reference rate for short term interest rates. It is compiled by the BBA in conjunction with Reuters and released to the market shortly after 11.00am London time each day.

Where is the BBA LIBOR standard used?

BBA LIBOR is the primary benchmark for short term interest rates globally. It is used as the basis for settlement of interest rate contracts on many of the world's major futures and options exchanges (including LIFFE, Deutsche Term Börse, Chicago Mercantile Exchange, Chicago Board of Trade, SIMEX and TIFFE) as well as most Over the Counter (OTC) and lending transactions.

How is BBA LIBOR produced? And published?

The British Bankers' Association (BBA), advised by senior market practitioners, maintains a reference panel of at least 8 contributor banks. For a full current list of which banks are contributing to each panel please see link at the bottom of the page. The aim is to produce a reference panel of banks which reflects the balance of the market - by country and by type of institution. Individual banks are selected within this guiding principle on the basis of reputation, scale of market activity and perceived expertise in the currency concerned.

The BBA surveys the panel's market activity and publishes their market quotes on-screen. The top quartile and bottom quartile market quotes are disregarded and the middle two quartiles are averaged: the resulting "spot fixing" is the BBA LIBOR rate. The quotes from all panel banks are published on-screen to ensure transparency. For a full description of the process please see the link at the bottom of the page.

BBA LIBOR fixings are provided in ten currencies:

Currency Name	ISO 4217 currency code*
Pound Sterling	GBP
US Dollar	USD
Japanese Yen	JPY
Swiss Franc	CHF
Canadian Dollar	CAD
Australian Dollar	AUD
Euro**	EUR
Danish Krona	DKK
Swedish Krona	SEK
New Zealand Dollar	NZD

* This is an international standard describing three letter codes to define the names of currencies established by the International Organization for Standardization (ISO).

** BBA EUR LIBOR is the successor BBA LIBOR fixing for the eurozone legacy currencies, which ceased to be fixed at the beginning of 1999.

Where can I find BBA LIBOR rates / data?

BBA LIBOR is compiled each London Business day by Reuters and distributed live via a number of data vendors including Reuters, Thomson Financial, Bloomberg, Quick, Infotec, Class Editori, IDC, Proquote and Telekurs.

Many websites operated by financial services and media outlets are licensed to display BBA LIBOR data at the end of the day (that is, after 5pm London Time). Additionally, the financial press, including the Wall Street Journal and Financial Times publish BBA LIBOR data from the previous day.

All BBA LIBOR rates are posted on their website (www.bba.org.uk), with a rolling 7 day delay, please see link at the top of the page.

Why is the BBA LIBOR standard important?

BBA LIBOR is important because:

• it is long established
• it offers the largest range of international rates
• it is a truly international reference rate
• it has a wide commercial use
• it enjoys wide international dissemination
• its mechanism is transparent
• it provides a robust settlement rate
• the banks represented on the panels are the most active in the cash markets and have the highest credit ratings

BBA LIBOR's London base is significant: well over 20% of all international bank lending and more than 30% of all foreign exchange transactions take place through the offices of banks in London and represents a unique snapshot of competitive funding costs. London has representation from close to 500 banks, and many other major financial institutions actively trade in the euromarkets which are based primarily in London. In addition, no reserve requirements are applied in London.

Can you provide a forecast on what BBA LIBOR rates will be in the future?

BBA LIBOR is extremely market sensitive and affected by a number of factors such as liquidity in the London cash markets, constitution of the contributor panels and local interest rate policy. The BBA therefore is not able to provide any forecasts for the future.

Long-term BBA LIBOR rates

BBA LIBOR is a short-term interest rate deposit rate and is only calculated up to a maturity of 12 months. We have never calculated BBA LIBOR rates beyond this nor do we have any intention of doing so as the liquidity in the London interbank cash market dries up after a one year maturity. Some people use interest rates swap rates as approximation for longer periods but please be aware that the methodology is likely to be quite different for BBA LIBOR.

What do the abbreviations s/n, o/n and 1 w, 1 month mean?

These abbreviations stand for the maturities for which BBA LIBOR is fixed. There are 15 different maturities for each currency and day of fixing. The shortest maturity is overnight (O/N) for Euro, US Dollar, Pound Sterling, and Canadian Dollar and spot/next (s/n) for all other currencies. 1 w stands for 1 week and 1m stands for 1 month. The longest maturity for which BBA LIBOR is fixed is 12 months.

An "overnight" rate that you see quoted today will value today and mature tomorrow.

A "spot / next" rate that you see quoted today will value in 2 days (i.e. the day after tomorrow) and mature the day after that.

BBA LIBOR Historic rates

The BBA have posted all rates we hold on our website. Please see a link to the historic BBA LIBOR at the bottom of the page. BBA LIBOR fixings did not commence officially before 1 January 1986, although before that some rates have been fixed for a trial period commencing in December 1984. Due to the specific methodology of calculating BBA LIBOR it is not possible to reconstruct rates before the official fixings commenced. There are a few websites that purport to be showing BBA LIBOR rates before the mid-80s but these are in no way affiliated with the BBA, who is the sole supplier of BBA LIBOR, and so we would not vouch for their accuracy.

Is there was any specific reason for why BBA LIBOR started in 1984. What was the historical impetus?

During 1984 it became apparent that an increasing number of banks were trading actively in a variety of relatively new market instruments, notably Interest Rate Swaps, Foreign Currency Options and Forward Rate Agreements. Whilst recognizing that such instruments brought more business and greater depth to the London Interbank market, it was felt that future growth could be inhibited unless a measure of uniformity was introduced. In October 1984 the BBA working with other parties such as the Bank of England established various working parties, which eventually culminated in the production of the BBAIRS terms - the BBA standard for Interest Swap rates. Part of this standard included the fixing of BBA Interest Settlement rates, the predecessor of BBA LIBOR. From 2 September 1985 the BBAIRS terms became standard market practice.

Factors that influence BBA LIBOR rates

BBA LIBOR rates are dependent on a number of factors, including local interest rates, banks expectations of future rate movements, the profile of contributor banks (contributor panels are changed annually), liquidity in the London markets in the currency concerned etc.

Does BBA EUR LIBOR follow Target or London business days?

BBA Euro LIBOR follows the Target calendar - as set by the European Central Bank. So on days in which Target is open but London is closed, only the EUR BBA LIBOR rate will be fixed. If Target is closed but London is trading we will fix EUR BBA LIBOR with the exception of the s/n maturity.

BBA LIBOR calculation basis

BBA LIBOR is not a compounded rate but is calculated on the basis of actual days in funding period/360. Therefore the formula is as follows: interest due = principal x (libor rate/100) x (actual no of days in interest period/360). Please note that for GBP) the calculation basis is 365 days.

It is also important to work out the exact/actual number of days in the funding period which is not always 90 days for a 3 month deposit but could e.g. be 89 or 91 days.

If you have a funding period of, for example, 45 days you could extrapolate between the 1 and the 2 month rate to arrive at the correct BBA LIBOR rate.

Relationship between different currencies

BBA LIBOR is set entirely independently for each currency by a different panel of banks and the rates are not interrelated via a currency conversion or any other means. In fact BBA LIBOR gives an idea at which interest rates banks can borrow funds in the currency concerned in the London cash market.

For instance, borrowings in USD are sometimes referred to as Eurodollar interest rates. The factor that has most impact on each of the rates is the domestic interest, which for USD rates will be the Fed fund rates.

The BBA LIBOR fixing - definition

BBA LIBOR is the BBA fixing of the London Inter-Bank Offered Rate. It is based on offered inter-bank deposit rates contributed in accordance with the Instructions to BBA LIBOR Contributor Banks.

The BBA will fix BBA LIBOR and its decision shall be final. The BBA consults on the BBA LIBOR rate fixing process with the BBA LIBOR Steering Group. The BBA LIBOR Steering Group comprises leading market practitioners active in the inter-bank money markets in London.

BBA LIBOR is fixed on behalf of the BBA by the Designated Distributor and the rates made available simultaneously via a number of different information providers.

Contributor Panels shall comprise at least 8 Contributor Banks. Contributor Panels will broadly reflect the balance of activity in the inter-bank deposit market. Individual Contributor Banks are selected by the BBA?s FX & Money Markets Advisory Panel after private nomination and discussions with the Steering Group, on the basis of reputation, scale of activity in the London market and perceived expertise in the currency concerned, and giving due consideration to credit standing.

The BBA, in consultation with the BBA LIBOR Steering Group, will review the composition of the Contributor Panels at least annually.

Contributed rates will be ranked in order and only the middle two quartiles averaged arithmetically. Such average rate will be the BBA LIBOR Fixing for that particular currency, maturity and fixing date. Individual Contributor Panel Bank rates will be released shortly after publication of the average rate.

The BBA, in consultation with the BBA LIBOR Steering Group, will review the BBA LIBOR Fixing process from time to time and may alter the calculation methodology after due consideration and proper notification of the planned changes.

In the event that it is not possible to conduct the BBA LIBOR Fixing in the usual way, the BBA, in consultation with Contributor Banks, the BBA LIBOR Steering Group and other market practitioners, will use its best efforts to set a substitute rate. This will be the BBA LIBOR Fixing for the currency, maturity and fixing date in question. Such substitute fixing will be communicated to the market in a timely fashion.

If an individual Contributor Bank ceases to comply with the spirit of this Definition or the Instructions to BBA LIBOR Contributor Banks, the BBA, in consultation with the BBA LIBOR Steering Group, may issue a warning requiring the Contributor Bank to remedy the situation or, at its sole discretion, exclude the Bank from the Contributor Panel.

If an individual Contributor Bank ceases to qualify for Panel membership the BBA, in consultation with the BBA LIBOR Steering Group, will select a replacement as soon as possible and communicate the substitution to the market in a timely fashion.

Instructions To BBA Libor Contributor Banks

1. An individual BBA LIBOR Contributor Panel Bank will contribute the rate at which it could borrow funds, were it to do so by asking for and then accepting inter-bank offers in reasonable market size just prior to 1100.
2. Rates shall be contributed for currencies, maturities and fixing dates and according to agreed quotation conventions.
3. Contributor Banks shall input their rate without reference to rates contributed by other Contributor Banks.
4. Rates shall be for deposits:
   • made in the London market in reasonable market size;
   • that are simple and unsecured;
   • governed by the laws of England and Wales;
   • where the parties are subject to the jurisdiction of the courts of England and Wales.
5. Maturity dates for the deposits shall be subject to the ISDA Modified Following Business Day convention, which states that if the maturity date of a deposit falls on a day that is not a Business Day the maturity date shall be the first following day that is a Business Day, unless that day falls in the next calendar month, in which case the maturity date will be the first preceding day that is a Business Day.
6. Rates shall be contributed in decimal to at least two decimal places but no more than five.
7. Contributors Banks will input their rates to the Designated Distributor between 1100hrs and 1110hrs, London time.

The Designated Distributor will endeavour to identify and arrange for the correction of manifest errors in rates input by individual Contributor Banks prior to 1130.

The Designated Distributor will publish the average rate and individual Contributor Banks' rates at or around 1130hrs London time.

Remaining manifest errors may be corrected over the next 30 minutes. The Designated Distributor then will make any necessary adjustments to the average rate and publish it as the BBA LIBOR Fixing at 1200hrs.

 

How can I obtain BBA LIBOR rates on the day of calculation?

In order to receive this data you must get a licence from the BBA, for which there may be a charge. Please contact Chris Ford - BBA LIBOR Assistant ( christopher.ford@bba.org.uk ).