Financial Knowledge

The relationship between interbank offered rate and interbank offered rate

March 31, 2020

Interbank offered rate refers to the short-term fund lending rate between financial institutions. It has two interest rates. The interest rate of borrowing indicates the interest rate that financial institutions are willing to borrow; the interest rate of lending indicates the interest rate that financial institutions are willing to lend.

Interbank lending rate is the price of funds in the lending market, the core interest rate in the money market and the representative interest rate in the whole financial market. It can reflect the supply and demand of short-term funds in the money market and even the whole financial market in a timely, sensitive and accurate manner. When the inter-bank lending rate continues to rise, the demand for funds is greater than the supply, indicating that market liquidity may decline. When the inter-bank lending rate falls, the opposite is true.

Interbank lending rate refers to the short-term fund lending rate between banks. It has two interest rates. The interest rate of borrowing indicates the interest rate that the bank is willing to borrow; the interest rate of lending indicates the interest rate that the bank is willing to lend. One bank’s borrowing is actually another bank’s borrowing. The interest margin between the borrowing and lending rates of the same bank is the bank’s income.

The interbank offered rate (Shibor) adopts the quotation system, which is based on the borrowing rate. That is, participating banks quote for each term of the borrowing varieties every day. After weighted average processing of the quotation, the average borrowing rate of each term is published as Shibor rate.

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