LIBOR rigging: Difference between revisions

{{drop|“T|he courts have}} for many years been developing and using a broad concept which at times has threatened to bring chaos rather than light to the solution of the legal problems it has affected. This concept enunciates the division between questions of law and questions of fact.  

:—''{{plainlink|https://scholarship.law.wm.edu/facpubs/810/|What is a “Question of Law”?}}'', Arthur W. Phelps, 1949, bringing yet more chaos to the table.

{{drop|T|he basic model}} of a bank is to borrow, short-term, at a low rate, and lend, long-term, at a high rate. ''Generally'' banks calculate interest on deposits, by which they borrow, at a [[Floating rate|floating]] rate and on term loans, by which they lend, at [[Fixed rate|fixed]] rates. There is a straightforward reason for this: [[Deposit|call deposit]]<nowiki/>s don’t have a term: they can be withdrawn at any time. All you can do is apply a prevailing daily rate.<ref>You could look at deposits as “rolling overnight term loans”. Their fixed interest therefore resets each day. Yes: there are such things as term deposits, but roughly 70% of deposits are overnight. (see ''{{Plainlink|https://www.bankofengland.co.uk/statistics/tables|Bank of England statistics}}'').</ref> On the other hand, most people who borrow for a fixed term want certainty on how much interest they must pay, so they prefer fixed interest.

So knowing what that floating rate is, and managing it, is an important risk management function for the bank. A risk well managed is called a “return”. The floating rate is different from the central bank’s base rate, and moves daily in response to market conditions: