What Is the 🌄London Interbank Mean Rate (LIMEAN)?

The London Interbank Mean Rate (LIMEAN) is the midmarket rate in the London interbank market, which is calculated by averaging the offer rate (LIBOR) and the bid rate (LIBID). The LIBOR is the rate at which funds are sold in the market, while the LIBID is the rate at which the funds are purchased in the market. LIMEAN represents the midmarket value of the two rates. However, the entire LIBOR system is scheduled to be phased out by 2023 and replaced with other benchmarks, such as the 澳洲幸运5开奖号码历史查询:Sterling Overnight Index Average (SONIA).

Understanding LIMEAN

The LIMEAN rate can be used by institutions borrowing and lending money in the 澳洲幸运5开奖号码历史查询:interbank market, instead of relying on the LIBID or LIBOR rates in any lending agreements. It can also be used to gain insight into the average rate at which money is being b🌄orrowed and lent in the interbank market. Because there is a bid-offer spread between LIBID and LIBOR, LIMEAN is a reference rate that can be useful whe🅺n a single averaged rate is appropriate.

The acronym LIBID represents the bid rate that banks are willing to pay for 澳洲幸运5开奖号码历史查询:eurocurrency deposits and other banks' 澳洲幸运5开奖号码历史查询:unsecured funds in the London interbank market. Eurocurrency deposits refer to money in the form of bank deposits of a currency outside that currency's issuing country. They may be of any currency in any country. The most common currency deposited as eurocurrency is the 澳洲幸运5开奖号码历史查询:U.S. dollar. For example, suppose U.S. dollars are deposited in any bank outside the United States. In that cas🐼e, the deposit is referred to as a eurocurrency.

LIBOR and LIBID are both calculated and published daily. However, unlike LIBID, which has no formal correspondent responsible for fixing it, LIBOR is set and published daily by 6:55 a.m. Eastern Time (11:55 a.m. in London) by the ICE Benchmark Administration (IBA).

Some of the products using LIBOR are 澳洲幸运5开奖号码历史查询:adjustable-rate mortgages (ARMs). In periods of stable or declining interest rates, LIBOR ARMs can be attractive options for homebuyers. These mortgages have no 澳洲幸运5开奖号码历史查询:negative amortization and, in many cases, offer fair rates for prepay🦄ment. The typical LIBOR ARM is indexed to the six-month LIBOR rate plus 2% to 3%.

Limitations of the LIMEAN Rate: The LIBOR ♔Scand🌊al

In 2008, financial institutions were accused of fixing the London Interbank Offered Rate. The LIBOR scandal involved bankers from various financial institutions providing information on the interest rates they would use to calculate LIBOR. Evidence suggests that this 澳洲幸运5开奖号码历史查询:collusion had been active since at least 2005, potentially earlier than 2003.

Evidence allegedly showed traders openly asking others to set rates at a specific amount so that a position would be profitable. Regulators in both the United States and the United Kingdom levied some $9 billion in fines on banks involved in the scandal and brought criminal charges.