London Interbank Offered Rate (LIBOR)

LIBOR — the London Interbank Offered Rate — was for decades a benchmark interest rate meant to reflect what major banks would charge each other to borrow money on an unsecured basis over various short periods. Published in several currencies and tenors, it became the reference rate built into a vast web of financial contracts worldwide — adjustable-rate mortgages, business loans, student loans, and especially derivatives, whose values were tied to LIBOR. The critical fact about LIBOR today is that it has been discontinued. After a rate-manipulation scandal exposed how a benchmark based partly on bank submissions could be gamed, regulators decided to retire it. Most LIBOR settings — including those for the British pound, euro, Japanese yen, and Swiss franc, plus one-week and two-month US dollar LIBOR — ceased after the end of 2021, and the remaining US dollar settings ceased after June 30, 2023.

LIBOR matters now mainly as history and as the thing the financial system spent years moving away from. Because it sat under so many contracts, its retirement was an enormous transition: countless loans and derivatives had to be amended or had fallback language triggered to move onto replacement rates. In the United States, the chosen successor is the Secured Overnight Financing Rate (SOFR), an overnight rate based on actual secured transactions rather than bank estimates. A temporary 'synthetic' US dollar LIBOR was published to ease legacy contracts and ceased permanently after September 2024. The lesson of LIBOR's downfall — that a benchmark resting on judgment and submissions can be manipulated — drove the shift to rates grounded in real transaction data. Treat LIBOR as retired, not current.

The contrast that matters most is LIBOR versus SOFR, its main US replacement. LIBOR was an unsecured, forward-looking, multi-tenor rate built partly on what banks said they would charge — which made it convenient but vulnerable, since submissions could be shaded and, after the crisis, the underlying interbank lending it was meant to measure had thinned out. SOFR, the Secured Overnight Financing Rate, is different by design: it is an overnight rate published by the Federal Reserve Bank of New York, based on actual secured borrowing in the US Treasury repurchase (repo) market, so it reflects a deep, real, transaction-based market and is far harder to manipulate. The move from LIBOR to SOFR is a move from an estimate-based, unsecured benchmark to a transaction-based, secured, risk-free one — the central change in how short-term rates are referenced.

There are practical differences beyond integrity. LIBOR was published in term tenors (one month, three months, and so on) and embedded a measure of bank credit risk; SOFR is fundamentally an overnight, near-risk-free rate, with term and averaged versions built on top to serve contracts that need a forward-looking rate. That structural difference meant the transition was not a simple find-and-replace: spreads and conventions had to be adjusted so that switching benchmarks did not unfairly change what borrowers owed. Other jurisdictions adopted their own risk-free replacements as well. The thread running through all of it is the same: LIBOR is the retired benchmark, and rates like SOFR — grounded in actual transactions — are what replaced it. Anything still referencing LIBOR as a live rate is out of date.

Understanding LIBOR correctly today means treating it as a discontinued benchmark, not a current one — knowing that most settings ended after 2021 and the remaining US dollar settings after June 30, 2023, and that risk-free rates such as SOFR have replaced it. For anyone reading, writing, or marketing around financial products, that means not referencing LIBOR as a live rate, recognizing when older documentation or content still mentions it, and understanding that loans and instruments once tied to LIBOR have moved to replacement rates. It also means appreciating why the change happened: the manipulation scandal showed the danger of a benchmark built on submissions rather than transactions, and the system responded by anchoring rates in real, observable markets. That is a useful lens for judging the credibility of any benchmark.

The failures are treating LIBOR as if it were still in use, quoting it as a current rate in content or marketing, missing legacy references to it in older material that should be updated, and not understanding that its successor rates are structured differently (overnight and secured rather than term and unsecured). The sound posture is to know LIBOR is retired, to use and reference its replacements like SOFR for anything current, and to flag stale LIBOR mentions for updating. This is general information about a discontinued benchmark, not financial or legal advice — but getting the basic fact right, that LIBOR is gone, is the difference between current and out-of-date financial content.

LIBOR (London Interbank Offered Rate) — a former benchmark interest rate retired after a manipulation scandal — has been discontinued, with US dollar settings ending after June 30, 2023 and replaced by rates like SOFR.

Etymology: source.

Search interest for this term over the last five years:

View interest-over-time on Google Trends →

Areas of marketing where london interbank offered rate (libor) is a core concern: