1. What is Libor?

A global benchmark interest rate used to set a range of financial deals. It is also a measure of trust in the financial system and the faith banks have in each other's financial health
2. Why is it important?
The Libor, or London Interbank Offered Rate, is used to set a range of financial transactions worth an estimated $300 trillion
3. How is it set?
Every day a group of leading banks submit rates for 10 currencies and 15 lengths of loan ranging from overnight to 12 months.

The most important is the three-month dollar Libor. The rates submitted are what the banks estimate they would pay other banks to borrow dollars for three months. This is a simple example of how it works.
4. How was it rigged?
By traders
Since the rates submitted are estimates not actual transactions it's relatively easy to submit false figures.

Traders at several banks conspired to influence the Libor by getting colleagues to submit rates that were either higher or lower than their actual estimate
Libor and the financial crisis

At the height of the financial crisis in late 2007, many banks stopped lending to each other over concerns about their financial health with some banks submitting much higher rates than others.

Barclays was one of those submitting much higher rates, attracting some media attention. This prompted comment that Barclays was in trouble.

Following much internal debate and a controversial conversation with a Bank of England official, Barclays began to submit much lower rates. You can see this in the graph below which compares the Libor rate with those submitted by