Definitions 
Each day, the British Bankers’ Association (BBA) publishes LIBOR, the London Interbank Offered Rate. LIBOR is the rate of interest at which banks are willing to lend to each other.
LIBOR is regarded as the most used benchmark for short-term interest rates (up to 12 months) and it is obtained from a filtered average of the interbank interest rates set by a restricted number of participating banks. Firstly released just after 11am, LIBOR rates change throughout the day, following different factors such the available liquidity on the market.
The need for LIBOR: Why Banks Borrow
At any particular time, banks may require money or have excess money. By borrowing and lending money from each other, banks are able to manage these liquidity issues in a more efficient manner.
The LIBOR Rate
LIBOR is closely related to the Bank of England base rate. However, depending on economic conditions, it may vary significantly from the bate rate. For example, if banks are sceptical about lending money to other institutions, LIBOR is likely to be significantly higher than the the Bank of England base rate.
