The Scope of LIBOR

The LIBOR is widely used as a reference rate for many financial instruments, such as:

forward rate agreements
short-term-interest-rate futures contracts
interest rate swaps
inflation swaps
floating rate notes
syndicated loans
variable rate mortgages
currencies, especially the US dollar
They, thus, provide the basis for some of the world's most liquid and active interest-rate markets.

For the euro, however, the usual reference rates are the Euribor rates compiled by the European Banking Federation, from a larger bank panel. A euro Libor does exist, but mainly for continuity purposes in swap contracts dating back to pre-EMU times. LIBOR is an estimate and not interred in the legally binding contracts of an LLC. It is, however, specifically mentioned as a reference rate in the market standard International Swaps and Derivatives Association documentation, which are used by parties wishing to transact in over-the-counter interest rate derivatives.

The Libor is used by the Swiss National Bank as their reference rate for monetary policy. In the United States in 2008, around 60 percent of prime adjustable rate mortgages and nearly all subprime mortgages were indexed as to the Libor. In 2012, around 45 percent of prime rate|prime adjustable rate mortgages and more than 80 percent of subprime mortgages were indexed to the Libor. American municipalities also borrowed around 75 percent of their money through financial products that were linked to the Libor.In the UK, the three-month GBP Libor is used for some mortgages—especially for those with adverse credit history.