See: Interbank.
It's the rate at which one bank lends to another.
Remember that the Fed lends money to banks initially. But they don't do it in one steady flow; in fact, Fed money comes out in waves, like the Sunday morning after New Years when you've had too much to drink.
So banks, finding themselves with more cash than they can loan out to would-be borrowers, ask to offload some of that dough to other banks who might be in more direct need of the dough.
Related or Semi-related Video
Finance: What is LIBOR?21 Views
Finance allah shmoop what is a lie Boer No it's
not the result of these two zoo animals Mating lie
Boer stands for london interbank offering rate And it's basically
just the british quote fed unquote central bank rate reflecting
the absolute lowest interest rate at which the british banking
system well loan money to its best Most well heeled
customers like you know sainsbury's and bp and barclays and
the guy who plans royal weddings So library is the
best or cheapest rate at which the british banking system
will lend money Most loans come at some premium to
lie before i risk your loans might come in something
like on a live or plus fifty basis points or
something like that so that if lie boris currently quoted
at two point two five percent interest well then the
lie bore plus fifty loan would be loaned out at
two point seven five percent interest And libras important has
been around forever and much of the world uses it
as thie pegging number two then add some risk percentage
on top of it when they quote loans to whoever
they're loaning money to That's basically it No need for 00:01:08.819 --> [endTime] any wild animals teo you know get wild
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