The wholesale money market in which banks lend to and borrow from one another. The importance of the market is that it allows individual banks to adjust their liquidity positions quickly, covering shortages by borrowing from banks with surpluses. This reduces the need for each bank to hold large quantities of liquid assets, thus releasing funds for more profitable lending transactions. The Inter Bank Offered Rate (IBOR) is the rate of interest charged on interbank loans in a particular financial centre. See London Inter Bank Offered Rate.
Subjects: Financial Institutions and Services.