LIBOR & MIBOR

LIBOR (London Interbank Offered Rate)

LIBOR is a benchmark interest rate that represents the average interest rate at which banks borrow unsecured funds from other banks in the London interbank market. It is calculated daily by the Intercontinental Exchange (ICE) based on submissions from a panel of leading banks.

LIBOR is used as a reference rate for a wide range of financial instruments, including loans, bonds, and derivatives. It is also used to set the interest rates on credit cards and other consumer loans.

MIBOR (Mumbai Interbank Offered Rate)

MIBOR is a benchmark interest rate that represents the average interest rate at which banks borrow unsecured funds from other banks in the Mumbai interbank market. It is calculated daily by the Clearing Corporation of India Limited (CCIL) based on submissions from a panel of leading banks.

MIBOR is used as a reference rate for a wide range of financial instruments, including loans, bonds, and derivatives. It is also used to set the interest rates on credit cards and other consumer loans.

Comparison of LIBOR and MIBOR

LIBOR and MIBOR are both benchmark interest rates that are used as reference rates for a wide range of financial instruments. However, there are some key differences between the two rates.

• Currency: LIBOR is quoted in US dollars, while MIBOR is quoted in Indian rupees.
• Calculation: LIBOR is calculated based on submissions from a panel of leading banks, while MIBOR is calculated based on submissions from a panel of leading banks in the Mumbai interbank market.
• Tenor: LIBOR is available for a variety of tenors, ranging from overnight to 12 months, while MIBOR is available for a variety of tenors, ranging from overnight to 1 year.

LIBOR and MIBOR Scandals

In recent years, LIBOR and MIBOR have been embroiled in a number of scandals. In 2012, it was revealed that a number of banks had been manipulating LIBOR submissions in order to benefit from their own trading positions. This led to a number of lawsuits and regulatory investigations.

In 2013, it was revealed that a number of banks had also been manipulating MIBOR submissions. This led to a number of lawsuits and regulatory investigations.

The LIBOR and MIBOR scandals have damaged the reputation of these benchmark interest rates and have led to calls for reform. In response to these scandals, the ICE and the CCIL have implemented a number of reforms to the way that LIBOR and MIBOR are calculated.

Conclusion

LIBOR and MIBOR are two of the most important benchmark interest rates in the world. They are used as reference rates for a wide range of financial instruments, including loans, bonds, and derivatives. However, the LIBOR and MIBOR scandals have damaged the reputation of these rates and have led to calls for reform.