EU probes interbank lending rates

EU probes interbank lending rates
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The European Commission has raided a number of banks, including Deutsche Bank, in a probe into possible fixing of interbank lending rates — known as Euribor.

The suspicion is that anti-competition rules may have been broken, but the European Banking Federation, which hosts the committees of banks that set the rates, said it will cooperate and does not see how they could have been manipulated:

Guido Ravoet, head of the European Banking Federation, told euronews: “The inquiry is not on the Euribor as such, we check if the quotes given by these banks are reflecting the market reality, and so, it is a closely monitored system and we are sure that the problem is not there.”

“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 said.

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 the London based equivalent LIBOR. Most major banks, including Santander, BNP Paribas and UBS, are on the Euribor panel.

This is the Commission’s third major investigation of the finance sector this year.

Banks are 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.

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