Interbank Rate


DEFINITION of '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.

BREAKING DOWN 'Interbank Rate'

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.

  1. LIBOR

    LIBOR or ICE LIBOR (previously BBA LIBOR) is a benchmark rate ...
  2. Overnight Rate

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  3. LIBOR Flat

    An interest rate benchmark used to establish the floating interest ...
  4. Douglas Amendment

    An amendment made to the Bank Holding Act of 1956. The Douglas ...
  5. Euro Overnight Index Average - ...

    The weighted average of overnight Euro Interbank Offer Rates ...
  6. Euro Interbank Offer Rate - EURIBOR

    The rates offered to prime banks on euro interbank term deposits. ...
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