Chartered Market Technician Practice Exam 2025 – Complete Prep Guide

LIBOR, or the London Interbank Offered Rate, primarily serves as a benchmark for various types of interest rate financial instruments, especially in the realm of commercial and consumer loans. It enables banks to determine the interest rates they will charge each other for short-term loans, which in turn influences the rates that banks offer to consumers and businesses for loans and mortgages. This relationship makes LIBOR a critical reference in assessing borrowing costs in a variety of credit products, from personal loans to business financing.

While it’s true that LIBOR also plays a role in derivatives pricing, foreign exchange, and in some equity trading scenarios, its fundamental purpose revolves around lending practices, making it integral to the commercial and consumer loan markets. The reliance on LIBOR provides a standard that ensures consistency and transparency in loan agreements, which is essential for both borrowers and lenders.