In banking, the benchmark rate is a reference lending rate used by banks to price their interbank loans. The most widely used benchmark rate is LIBOR which is based on an average of money-market interbank rates.
In contrast, the prime rate is the reference rate that banks use in lending their credit-worthy customers. The LIBOR rate is published on a daily basis by the British Banker’s Association, as the average rate changes from day to day. The prime rate, on the contrary, doesn’t change so frequently, and can remain unchanged for long intervals. In this sense, the benchmark lending rate is volatile, whilst the prime rate is relatively stable. Furthermore, the LIBOR rate has nothing to do with macroeconomic regulatory monetary policies, unlike the prime rate which is tied to a central bank’s policies and considerations.
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