Libor: What You Need to Know
What it is: Libor—the London interbank offered rate benchmark—is supposed to measure the interest rates at which banks borrow from one another. It is based on data reported daily by banks. Other interest rate indexes, like the Euribor (euro interbank offered rate) and the Tibor (Tokyo interbank offered rate), function in a similar way.
Why it is important: Hundreds of trillions of dollars of securities and loans are linked to the Libor, including $350 trillion in swaps and $10 trillion in loans, including auto and home loans, according to the Commodity Futures Trading Commission. Even small movements—or inaccuracies—in the Libor affect investment returns and borrowing costs, for individuals, companies and professional investors.
LONDON—U.S. and British regulators are nearing a deal with Lloyds Banking GroupLLOY.LN -0.38% PLC to resolve investigations into the bank’s alleged attempts to manipulate benchmark interest rates, according to people familiar with the matter.
Settlement talks have accelerated recently, and regulators are hoping to announce a deal in the next few weeks, these people said.
Lloyds, which is about 25%-owned by the British government after a taxpayer bailout, would become the seventh financial institution to resolve U.S. and British investigations into attempted rigging of the London interbank offered rate, or Libor, and other widely used benchmark rates.
Negotiations between Lloyds and the regulators are still in progress, these people said. The size of the financial penalty that Lloyds is likely to pay to the U.S. Commodity Futures Trading Commission, the U.K.’s Financial Conduct Authority and possibly other authorities isn’t clear.