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Simple English definitions for legal terms
Euro Interbank Offered Rate
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A quick definition of Euro Interbank Offered Rate:
EURO INTERBANK OFFERED RATE: The Euro Interbank Offered Rate, also known as Euribor, is a measure of the interest rate that major international banks charge each other for short-term loans of euros. This rate is determined daily by a group of representative banks across Europe. It is an important benchmark for financial markets and is often used as a reference rate for loans and other financial products.
A more thorough explanation:
Definition: The Euro Interbank Offered Rate (Euribor) is a benchmark interest rate that measures the average interest rate at which major international banks lend to each other in the eurozone for short-term loans. The rate is calculated daily based on data provided by a panel of representative banks across Europe.
Example: Let's say Bank A needs a short-term loan of €1 million from Bank B. Bank B offers to lend the money at a rate of 1.5%. This rate is based on the Euribor, which is the average interest rate at which major banks in the eurozone lend to each other.
Explanation: The Euribor is an important benchmark interest rate that is used in financial markets to determine the cost of borrowing for banks and other financial institutions. It is also used as a reference rate for a wide range of financial products, including mortgages, loans, and derivatives. The example illustrates how the Euribor is used to determine the interest rate for a short-term loan between two banks in the eurozone.