What it is:
Euro LIBOR is the interest rate at which banks borrow euros from other banks in the London interbank market.
How it works (Example):
LIBOR is an acronym that stands for London Interbank Offer Rate.
The Euro LIBOR is an average of interbank deposit rates offered by members of the British Bankers Association (BBA). The lending rate is set by 16 of the world's most creditworthy banks and fluctuates throughout the day.
Why it Matters:
Euro LIBOR is essential to helping banks maintain liquidity requirements because they are able to borrow from other banks that have surpluses on hand quickly.