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The London Interbank Bid Rate (LIBID) is an incredibly important benchmark figure used throughout the global financial system. LIBID is the rate at which banks are all willing to borrow from each other in the form of eurocurrency deposits. This figure is important for not only setting the base level of financial activity, but also for creating new monetary policies and providing direction for future market trends.
LIBID is typically seen as counterpart, opposite of the more popular London Interbank Offer Rate (LIBOR). As opposed to LIBID which is the rate that banks are willing to borrow, LIBOR is the rate that the banks are willing to lend at. The difference in these two rates can highlight the overall amount of risk being taken, or not taken, by the banking system when deciding to lend or borrow.
As of 2021, both LIBOR and LIBID are in the process of being phased out due to market manipulation and scandals associated with market ‘fixing’ of the rates. As such, alternative benchmarks are being discussed in order to replace these rates.
The foremost currency used in LIBID and LIBOR trading is the United States dollar, for the simple reason that it is the most sought-after currency in Europe and throughout world. This is the reason why the US Dollar figures so heavily into both these and other important factors of global economic activity.
Overall, the London Interbank Bid Rate (LIBID) is an important figure in the world's financial market, of which LIBOR is equally as important. The fluctuation of these figures is indicative of the risks the banking system is taking when borrowing, or the level of risk they choose not to take when lending, and is of great importance to the overall direction of the markets on a global scale.
LIBID is typically seen as counterpart, opposite of the more popular London Interbank Offer Rate (LIBOR). As opposed to LIBID which is the rate that banks are willing to borrow, LIBOR is the rate that the banks are willing to lend at. The difference in these two rates can highlight the overall amount of risk being taken, or not taken, by the banking system when deciding to lend or borrow.
As of 2021, both LIBOR and LIBID are in the process of being phased out due to market manipulation and scandals associated with market ‘fixing’ of the rates. As such, alternative benchmarks are being discussed in order to replace these rates.
The foremost currency used in LIBID and LIBOR trading is the United States dollar, for the simple reason that it is the most sought-after currency in Europe and throughout world. This is the reason why the US Dollar figures so heavily into both these and other important factors of global economic activity.
Overall, the London Interbank Bid Rate (LIBID) is an important figure in the world's financial market, of which LIBOR is equally as important. The fluctuation of these figures is indicative of the risks the banking system is taking when borrowing, or the level of risk they choose not to take when lending, and is of great importance to the overall direction of the markets on a global scale.