Federal Reserve to Phase Out LIBOR by 2023

The Federal Reserve announced in November that it plans to start phasing out the London Interbank Offered Rate (LIBOR) by December 2021. LIBOR is an international reference rate for many financial activities like mortgages, student and auto loans across the global financial system. 

The Fed urged banks to cease entering into new contracts that use USD LIBOR by the end of the next year. The rate will be phased out in its entirety by June 2023. Expect many contracts bound to the LIBOR to have different maturity dates.

The LIBOR rate is the interest that banks charge each other for short-term lending amongst themselves. The average of at least eight bank’s short-term credit rates is used to derive the LIBOR. Banks voluntarily report their rates to the Intercontinental Exchange (IC...

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