Question

What is LIBOR, how is it used and why is it problematic?

Answer 1

LIBOR is the rate that is charged by the various banks in United Kingdom from each other when they are dealing in securities with one another because it means London interbank offering rate.

This is primary used between various banks who are operating in in United Kingdom in order to charge from each other in respect of various securities which has been issued to each other.

It is also used in swapping of the interest rate as various floating rates are to be used against fixed rates using LIBOR.

LIBOR cab can be e used by bank to manipulate there profit because it is internally managed between each other and this rates are also very manipulative and they are subject to criticisms from different sections of experts as they want to eliminate LIBOR.