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Monday, March 12, 2012

Big Banks at Center of Interest Rate Probe

NEW YORK (CNNMoney) -- It affects everything from mortgages to credit cards to student loans, and now some of the world's biggest banks are at the center of a criminal investigation into whether they manipulated it for their own benefit.

The London Interbank Offered Rate, or Libor, is a measure of the cost of borrowing between banks that serves as a benchmark for over $350 trillion worth of financial products worldwide.

Higher Libor rates translate into higher borrowing costs for businesses and consumers, while lower rates could make lenders reluctant to lend since they can't charge as much in interest. In addition to consumer loans, certain bonds and interest rate swaps also use it as a benchmark.


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