LIBOR is the average interest rate that leading banks in London charge when lending to other banks. Banks borrow money for one day, one month, two months, six months, one year, etc., and they pay interest to their lenders based on certain rates. The Libor figure is an average of these rates.
Many financial institutions, mortgage lenders and credit card agencies track the rate, which is produced daily at 11 a.m. to fix their own interest rates which are typically higher than the Libor rate. As such, it is a benchmark for finance all around the world.
At the height of the financial crisis allegations emerged that the LIBOR calculation was not really all above board. These allegations have persisted and LIBOR is currently at the heart of a sprawling regulatory investigation into possible manipulation.
Learn more about LIBOR and the current investigation from the London Financial Times. Watch the VIDEO HERE.