Alexa
  • Directory of Taiwan

US 3-month interbank rates up amid bank concerns

US 3-month interbank rates up amid bank concerns

The cost of three-month dollar loans between banks rose modestly Thursday on mounting concerns about the financial health of leading American banks.
The interbank lending rate on three-month loans in dollars _ known as the London Interbank Offered Rate, or Libor _ rose less than 1 percentage point to 1.09 percent from the previous day's five and a half year low. Over recent days, the big falls in the dollar rate experienced in the early part of the year had moderated amid concerns about capital shortages in the banks.
The viability of the world's banks resurfaced as a major concern in markets when Citigroup Inc. confirmed it is to merge its Smith Barney brokerage into a joint venture with Morgan Stanley, relinquishing control in exchange for $2.7 billion in badly needed cash.
Reports have also surfaced that the U.S. government was close to supplying Bank of America Corp., the nation's biggest bank by assets, with billions of dollars more in aid after it agreed to acquire debt-ridden Merrill Lynch & Co.
Meanwhile, the rate for three-month loans in euros _ known as the European Interbank Offered Rate, or Euribor _ decreased around 0.06 percentage points to 2.51 percent ahead of the European Central Bank's decision at 1245 GMT to cut its benchmark interest rate another half percentage point to 2 percent, the equal lowest level since the bank was formed ten years ago.
The equivalent rate for pounds fell about 0.01 percentage points to a fresh record low of 2.27 percent in the wake of the Bank of England's own half percentage point rate cut last Thursday.
Interbank rates are important because they affect the cost of loans in the wider economy, for both businesses and individuals. Rates have been high during the financial crisis as banks have hoarded cash and worried that other lenders might collapse and not pay them back.
Though the interbank lending rates have been falling consistently over the last few weeks in the wake of large interest rate cuts around the world and massive central bank liquidity provisions, all three rates remain above the levels markets think benchmark interest rates will be in three months.
Though the U.S. Federal Reserve cannot cut its benchmark rate further from the current 0-0.25 percent, the European Central Bank is expected to reduce its rate again from the new 2 percent benchmark, and the Bank of England is expected to cut its rates further in the coming months from its new record low of 1.5 percent.


Updated : 2021-04-22 09:24 GMT+08:00