Differences between EURIBOR and LIBOR
Contents
EURIBOR vs. LIBOR
The Euro Interbank Offered Rate (EURIBOR) and the London Interbank Offered Rate (LIBOR) are benchmark interest rates that indicate the average rate at which large banks lend to one another in the interbank market. These rates serve as reference points for a vast range of financial instruments, including home mortgages, corporate loans, and complex derivatives. Although both benchmarks measure the cost of unsecured wholesale funding, they differ in their administrative oversight, geographic application, and the currencies they represent. Following the 2012 LIBOR scandal, the global financial system initiated a transition away from LIBOR toward risk-free rates (RFRs), whereas EURIBOR was reformed to comply with new regulatory standards and remains in active use.[1]
Comparison table
| Category | EURIBOR | LIBOR |
|---|---|---|
| Primary currency | Euro (EUR) | Historically 5 (USD, GBP, EUR, CHF, JPY) |
| Administrator | European Money Markets Institute (EMMI) | ICE Benchmark Administration (IBA) |
| Number of tenors | Five (1 week, 1 month, 3 months, 6 months, 12 months) | Seven (Overnight to 12 months, varying by currency) |
| Calculation basis | Transaction-based "waterfall" methodology | Historically based on bank submissions |
| Geographic focus | European Union and EFTA countries | Global financial markets |
| Current status | Active and reformed | Largely discontinued; USD LIBOR ended June 2023 |
Methodological differences
The calculation of EURIBOR is overseen by the European Money Markets Institute (EMMI). Since 2019, it has used a hybrid methodology designed to prioritize actual market transactions. This "waterfall" approach first looks at real trades; if sufficient transaction data is unavailable, it incorporates derived data or expert judgment from a panel of contributing banks. This change was implemented to align the benchmark with the European Union Benchmark Regulation (BMR).[2]
LIBOR was managed by the ICE Benchmark Administration (IBA) in London. For decades, it relied on a process where panel banks answered the question: "At what rate could you borrow funds, were you to do so by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11 am?" This reliance on "expert judgment" rather than hard transaction data made the rate vulnerable to manipulation. Because the underlying market for unsecured interbank lending declined after the 2008 financial crisis, the submissions often lacked a factual basis in real trades.[3]
Transition and cessation
Following the discovery of widespread rate-rigging in 2012, regulators determined that LIBOR was structurally flawed. The Financial Conduct Authority (FCA) announced that it would no longer compel banks to submit LIBOR quotes after 2021. This led to the adoption of alternative reference rates. In the United States, the Secured Overnight Financing Rate (SOFR) replaced USD LIBOR, while the Sterling Overnight Index Average (SONIA) replaced GBP LIBOR. Unlike LIBOR, these new rates are based entirely on historical transaction data and are secured by collateral, such as U.S. Treasuries in the case of SOFR.[4]
In contrast, EURIBOR remains a staple of the Eurozone financial system. While the Euro Short-Term Rate (€STR) was introduced as a risk-free alternative and replacement for EONIA, EURIBOR was not phased out. Instead, it was reinforced through the hybrid calculation model to ensure its sustainability and compliance with global standards for financial benchmarks.[5]
References
- ↑ European Money Markets Institute. "About Euribor." emmi-benchmarks.eu. Accessed February 22, 2026.
- ↑ Intercontinental Exchange. "ICE LIBOR." theice.com. Accessed February 22, 2026.
- ↑ Financial Conduct Authority. "Transition from LIBOR." fca.org.uk. Accessed February 22, 2026.
- ↑ Federal Reserve Bank of New York. "Transition from LIBOR." ny.fed.org. Accessed February 22, 2026.
- ↑ European Central Bank. "What is EURIBOR?" ecb.europa.eu. Accessed February 22, 2026.
