thanks
Hi Robert,
look here:
"In 1984, it became apparent that an increasing number of banks were trading actively in a variety of relatively new market instruments, notably interest rate swaps, foreign currency options and forward rate agreements. While recognizing that such instruments brought more business and greater depth to the London Interbank market, bankers worried that future growth could be inhibited unless a measure of uniformity was introduced. In October 1984, the British Bankers' Association (BBA)―working with other parties, such as the Bank of England―established various working parties, which eventually culminated in the production of the BBA standard for interest rate swaps, or "BBAIRS" terms. Part of this standard included the fixing of BBA interest-settlement rates, the predecessor of BBA Libor. From 2 September 1985, the BBAIRS terms became standard market practice. BBA Libor fixings did not commence officially before 1 January 1986. Before that date, however, some rates were fixed for a trial period commencing in December 1984."
To show other investors what the 'true' rate of lending and borrowing cash is. You can have a bank rate but that doesn't mean banks will use that rate as a benchmark.
Answer2. So someone could make extra profit!
By the way there are many more acronyms with similar basis. Like LIBID and even SONIA!
Does anyone know the reason for the LIBOR rate being introduced?
thanks
