EU Raids Banks in Probe of Possible Collusion in Interest-Rate Derivatives
By Aoife White – Oct 19, 2011 6:31 AM ET
European Union regulators raided banks that offer financial derivatives linked to the euro interbank offered rate, saying they were investigating possible collusion.
The European Commission said it had “concerns that the companies concerned may have violated EU antitrust rules that prohibit cartels and restrictive business practices.” It didn’t name the businesses involved.
The EU probe adds to earlier inquiries by the commission, U.K. and U.S. financial regulators into the possible breach of rules governing the Libor benchmark borrowing rate. Barclays Plc (BARC), HSBC Holdings Plc (HSBA) and Royal Bank of Scotland Group Plc (RBS) have said they were quizzed by the EU earlier this year.
Joaquin Almunia, the EU’s competition commissioner, has made financial markets one of his priorities. In April, he started a separate probe into Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and 14 other investment banks over agreements in the market for credit-default swaps that may harm competition.
‘A Few’ Raided
Banks including Deutsche Bank AG (DBK) and RBS were visited by EU officials yesterday, according to two people familiar with the probe.
Cedric Quemener, the manager at Euribor-EBF responsible for setting the euro interbank lending rate, said only “a few” of the 44 banks involved in Euribor were visited by EU officials yesterday. He said it would be “almost impossible” to manipulate the rate.
“You would need to have an agreement between so many different banks from so many different countries that there’s no way someone could do that,” Quemener said in a telephone interview from Brussels. “We have high monitoring and very clear transparency in the way we are defining Euribor.”
Libor and Euribor rates are used as benchmarks for trillions of dollars worth of financial products ranging from mortgages to student loans.
“We have nothing to hide,” Guido Ravoet, chief executive officer the European Banking Federation and member of the steering committee of Euribor-EBF said in an e-mailed statement. “We feel there is perhaps not enough understanding of the elaboration of the benchmarks themselves in the European Commission.”
The Wall Street Journal reported the EU raids yesterday.
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