Barclays’ $450m fine over misconduct relating to its Libor fixings is a massive deal. The fixings, which span ten currencies and 15 maturities, are used as the reference point for financial contracts worth a staggering $350trn.
Libor is also extremely important for the world’s major central banks, many of which use the fixings to help decide how much liquidity to inject into markets. See, for instance, the minutes of the Bank of England’s June Monetary Policy Committee meeting:
UK banks had continued to access some term funding markets, albeit at an elevated cost. In the interbank markets, sterling LIBOR-OIS spreads had remained elevated and larger than the corresponding euro spread.
However, the Swiss National Bank, goes a step further: when setting monetary policy, its governing council targets a certain level of three-month Libor for Swiss franc loans. Read more