In the foreign exchange market, we often hear questions about interest rates. In addition to the Federal Reserve's reduction of the federal funds rate and rediscount rate, there are some important interest rates that are unfamiliar to everyone, such as the London Interbank Offered Rate (LIBOR).
Libor refers to the short-term capital lending rate between top banks in London, which is the basic interest rate of most floating interest rates in the international financial market.
As the financing cost for banks to raise funds from the market for lending, the LIBOR agreed in the loan agreement is usually the average interest rate quoted by several designated reference banks at a specified time (usually 1 1: 00 London time).
The most commonly used Libor is 3 months and 6 months.
The cost of China's external financing is to add a certain percentage point to LIBOR interest rate.
From LIBOR, there are SIBOR, NIBOR, HIBOR and so on.
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Higher LIBOR interest rate not only means huge credit risk, in other words, some banks will go bankrupt because of it, but also will bring huge impact to the financial market.
Because once the LIBOR interest rate becomes higher, the frequency of inter-bank lending will be reduced and the speed of capital flow will be further reduced.
Some banks in urgent need of funds will face bankruptcy because they can't get loans in time.
Once the bank funds break, enterprises will encounter financial crisis and choose to close down or close down, which will lead to social and economic decline and increase unstable factors.
This is a vicious circle.
The change of LIBOR interest rate will have an impact on the monetary policies of various countries, and will also affect the supply and demand of funds in the market, thus affecting foreign exchange transactions.