Learn what interbank offered rates are and why they served as benchmarks for lending, derivatives, and floating-rate contracts.
Interbank offered rates are benchmark interest rates that reflect the rate at which banks indicate they are willing to lend to one another for specified terms.
These benchmarks mattered because many loans, swaps, and other contracts referenced them as reset rates. The term covers a family of benchmarks rather than one single rate. Over time, some well-known interbank benchmarks lost prominence or were replaced, but the idea remains important for understanding legacy contracts and the role of benchmark rates in finance.
A floating-rate loan or derivative might have been priced as a quoted spread above an interbank offered rate for a given tenor.
A reader says, “Interbank offered rates are the same as a central bank policy rate.” Is that correct?
Answer: No. They are market benchmark rates influenced by policy, but they are not identical to the policy rate itself.