The London interbank offered rate (Libor) was once called
"the world's most important number" by the British
Bankers' Association (BBA). Libor was established in 1986
to assist financial institutions in setting interest rates on large
corporate loans. It's a benchmark, calculated based
on bank estimates of the cost of borrowing money from other banks.
Over time, Libor became an integral part of global
finance, an important benchmark for short term interest rates, and
a factor in worldwide financial contracts in the approximate
hundreds of trillions of dollars sphere, affecting everything from
derivatives to credit cards.
The Libor was not subject to any significant government
regulation, although central bankers and government officials were
aware of its susceptibility to manipulation. In addition, the
Libor calculation was inherently inexact and subjective, since it
was based on banks' estimates of how much it might cost them to
borrow from other banks, and
