Finweek English Edition - - Openers -

THE LIBOR RATE IS cal­cu­lated ev­ery busi­ness day in 10 cur­ren­cies and 15 terms, rang­ing from overnight to one year. Rates on around US$10 tril­lion in cor­po­rate loans, mortgages, home eq­uity lines of credit and stu­dent loans world­wide are pegged to Libor, usu­ally with a mark-up of sev­eral per­cent­age points. The to­tal amount of fi­nance con­tracts tied to Libor ex­ceeds $300 tril­lion – that’s $45 000 for ev­ery per­son in the world.

Libor has pushed up rates on ad­justable mortgages as well as rates on many com­mer­cial loans and has blunted the ef­fec­tive­ness of the re­cent in­ter­est rate cuts by the world’s cen­tral banks. It also means that con­sumers and busi­nesses can find their ac­cess to credit se­verely re­stricted. That will dampen eco­nomic growth.

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