Interbank Market

The financial markets where banks trade currencies among each other and offer/take loans.

The interbank market is watched closely to assess credit risk and measure the state of the economy.  Interbank loans widely quote the LIBOR(London Interbank Offered Rate) as the interest rate. In a credit crunch situation, interbank market activities will slow down significantly or even freeze up (i.e. banks are unconfident in the ability of other banks to pay interbank loans). Such uncertainty in the interbank market can cause LIBOR rates to spike and the TED(Treasury Eurodollar) spread to widen, usually a sign of market distress and financial turmoil.