Defining the L in BBA LIBOR

19 Jun 2009

The independent Foreign Exchange and Money Markets Committee discuss the definition of BBA LIBOR each time they meet, to ensure the rates remain the best possible benchmark for these rapidly changing markets.

Currently, the notes that accompany the definition of BBA LIBOR state that: "Contributions [to the rate fixing process] must represent rates formed in London and not elsewhere"

At their recent meeting, Committee members felt that this could be further clarified as there could be different interpretations of what constitutes a rate "formed in London". In addition, there are many major participants in the London money markets that are either not physically located in London, or do not book trades in London.

Therefore, with immediate effect, this note accompanying the definition will read:

"Contributions must represent rates at which a bank would be offered funds in the London Money Market"

This clarification will not affect the way in which current contributors formulate their rate submissions. However, it may allow banks that participate in the London markets, whose eligibility for inclusion in the fixing was not previously clear, to apply to join the panels. This is in line with the commitment made last year as a part of the LIBOR consultation to allow expansion of the LIBOR panels, whilst ensuring that LIBOR remains a tightly defined measure of the cost of unsecured interbank funding each morning in the London Market.

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