The acronym LIBOR stands for the London Interbank Offered Rate.
For decades, LIBOR was a benchmark for short-term borrowing costs. A panel of major banks reported the interest rate at which they believed they could borrow unsecured funds from other banks in London. Administrators discarded the highest and lowest submissions before calculating an average, helping produce a representative rate.
LIBOR was quoted for several currencies and maturities, from overnight borrowing to one year. It influenced loans, derivatives, mortgages, bonds, and corporate financing around the world. A common mix-up is treating LIBOR as a lending rate: it primarily represented an estimated borrowing cost for the reporting banks.
The benchmark was gradually retired after manipulation scandals and declining interbank activity made submitted estimates less reliable. U.S. dollar LIBOR settings ended in 2023, while many other settings had already ceased earlier; replacement benchmarks include SOFR in the United States.