When two parties enter a financial contract in which interest payments are to be exchanged, they frequently choose to base those payments on LIBOR.
LIBOR is currently referenced in roughly $ trillion worth of contracts globally, which means that it is part of the global financial system’s critical infrastructure.1 But LIBOR’s credibility was badly undermined by the scandal that erupted when some of the banks that help produce the rate attempted to manipulate it by contributing inaccurate estimates of their borrowing costs.