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EU raids banks in lending rates probe

Oct 19 2011 18:14 Reuters

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Brussels/ Frankfurt - The European Commission has raided banks, including Deutsche Bank, in a probe into suspected fixing of interbank lending benchmark Euribor, the third major investigation of the finance sector by the EU’s powerful executive this year.

The EU’s executive, which has powers to impose heavy fines if it finds wrongdoing, said it had carried out the searches on concerns that the companies involved may have broken antitrust rules.

It is the third major probe into banking this year after separate investigations into credit default swaps, including a probe into whether banks manipulated another interbank lending benchmark, the London interbank offered rate, as well as one into cross-border bank payments.

Banks are already facing sweeping regulatory changes and tighter supervision of their business in the wake of the financial crisis. They were also a lightning rod for public protests in a “Day of Rage” over the weekend.

“If it is found true, it is a major concern and it is not going to help the cause of banks,” said a high-level EU banking regulator, who asked not to be identified, of the suspicions that prompted the EU raids.

Euribor is a benchmark rate that banks refer to when fixing a price on interbank euro loans. There are 44 contributors to the Euribor rate, far more than contribute to LIBOR. Most major banks, including Santander , BNP Paribas and UBS , are on the Euribor panel.

The rate is based on an average from the 44 and used on trillions of euros worth of euro-denominated loans and debt instruments. The European Banking Federation hosts the committees of banks that set the rate.

The investigation suggests that there has been a fixing of prices but Euribor-EBF, which compiles the benchmark, challenged this.

“We are open and prepared to share any data with the authorities,” said Cedric Quemener, manager of Euribor-EBF, which compiles the benchmark.
“We are fully confident in the governance of Euribor. With so many banks involved in setting the rate, fixing a rate artificially would be impossible. I believe the Commission lacks knowledge about how those benchmarks are made. We are ready to help them,” Quemener told Reuters.

The Commission, which acts as anti-trust regulator in the 27-state European Union, did not identify the companies or countries where it had carried out the raids. But a person familiar with the matter said Deutsche Bank’s London offices were among those raided. Deutsche Bank declined to comment.

The move comes alongside an investigation by enforcement agencies in the United States, Europe and Japan into whether the London Interbank Offered Rate (Libor) was manipulated during the last financial crisis.
deutsche bank  |  libor rates
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