What Organization Calculated the Libor Rate

The London Interbank Offered Rate (LIBOR) was for decades one of the most important interest rates in global finance. It served as a global benchmark for short-term interest rates, influencing the cost of borrowing for virtually everyone, from multinational corporations to homeowners with adjustable-rate mortgages. Given its immense significance, understanding who was responsible for its calculation is a key piece of financial history.

The Original Administrator: British Bankers' Association (BBA)

For the majority of its existence, LIBOR was calculated and administered by the British Bankers' Association (BBA). The process involved a panel of leading banks submitting estimates of the interest rates at which they believed they could borrow funds from other banks in the London interbank market. The BBA would then calculate an average of these submissions, excluding the highest and lowest figures, to determine the daily LIBOR rate for various currencies and maturities.

The Transition to ICE Benchmark Administration (IBA)

Following the LIBOR manipulation scandal that emerged around 2012, trust in the BBA's administration of the rate was severely shaken. Regulatory bodies, particularly the UK's Financial Conduct Authority (FCA), mandated a reform of the benchmark's administration. As a result, in February 2014, the responsibility for administering LIBOR was transferred from the BBA to ICE Benchmark Administration (IBA), a subsidiary of Intercontinental Exchange.

The End of LIBOR

Despite the change in administration, concerns about the rate's reliability and its reliance on expert judgment rather than actual transaction data persisted. Consequently, global regulators coordinated a phasing out of LIBOR. Most LIBOR settings ceased publication at the end of 2021, with the remaining few USD settings ending in mid-2023. The financial world has since transitioned to Alternative Reference Rates (ARRs) such as SOFR (Secured Overnight Financing Rate) in the US and SONIA (Sterling Overnight Index Average) in the UK.

Test Your Knowledge: LIBOR Administrator Check

Based on the article, which organization was the final official administrator of the LIBOR rate before its cessation?

— Select an Organization — British Bankers' Association (BBA) ICE Benchmark Administration (IBA) Financial Conduct Authority (FCA) Bank of England

function checkLiborOrganization() { var selectedOrg = document.getElementById("libor-org-select").value; var resultDiv = document.getElementById("libor-result"); var resultText = ""; if (selectedOrg === "") { resultText = "Please select an organization from the dropdown menu."; } else if (selectedOrg === "iba") { resultDiv.style.backgroundColor = "#dff0d8"; resultDiv.style.borderColor = "#d6e9c6"; resultText = "Correct!ICE Benchmark Administration (IBA) became the administrator of LIBOR in February 2014, taking over from the British Bankers' Association. They were responsible for its calculation until the rates ceased publication."; } else if (selectedOrg === "bba") { resultDiv.style.backgroundColor = "#fcf8e3"; resultDiv.style.borderColor = "#faebcc"; resultText = "Historically Accurate, But Not the Final Administrator.The British Bankers' Association (BBA) was the *original* administrator. However, after the LIBOR scandal, responsibility was transferred to ICE Benchmark Administration (IBA) in 2014."; } else { resultDiv.style.backgroundColor = "#f2dede"; resultDiv.style.borderColor = "#ebccd1"; resultText = "Incorrect.While the FCA regulated the process and the Bank of England was involved in the transition, neither was the organization responsible for the daily calculation and administration of the LIBOR rate itself. The correct answer is ICE Benchmark Administration (IBA)."; } resultDiv.innerHTML = resultText; }