Interbank Rate
The rate of interest charged on short-term loans made between banks. Banks borrow and lend money in the interbank market in order to manage liquidity and meet the requirements placed on them. The interest rate charged depends on the availability of money in the market, on prevailing rates and on the specific terms of the contract, such as term length. Investopedia Says:
Banks are required to hold an adequate amount of liquid assets, such as cash, to manage any potential withdrawals from clients. If a bank can't meet these liquidity requirements, it will need to borrow money in the interbank market to cover the shortfall. Some banks, on the other hand, have excess liquid assets above and beyond the liquidity requirements. These banks will lend money in the interbank market, receiving interest on the assets.
There is a wide range of published interbank rates, including the LIBOR, which is set daily based on the average rates on loans made within the London interbank market. Related Terms:
Emirates Interbank Offered Rate - EIBOR
Euro Interbank Offer Rate - EURIBOR
Euro Overnight Index Average - EONIA
Hong Kong Interbank Offer Rate - HIBOR
Interbank Market
Johannesburg Interbank Agreed Rate - JIBAR
London Interbank Offered Rate - LIBOR
Money Market
Overnight Rate
Reykjavik Interbank Offered Rate - REIBOR |