EU Raids Banks In Suspected Interest-Rate Derivatives Cartel
BRUSSELS -- The European Commission Wednesday confirmed that its antitrust inspectors raided financial institutions involved in the market for interest- rate derivatives linked to the Euro Interbank Offered Rate, or Euribor.
The inspections took place Tuesday in "certain member states," the commission said, without providing more details. The Wall Street Journal reported Wednesday that among the targets were a large French bank and a large German bank.
More than 40 banks set Euribor, a benchmark that is used to set rates on trillions of euros worth of derivatives and loans.
-By Matthew Dalton, Dow Jones Newswires; +32 (0)2 741 1487; matthew.dalton@ dowjones.com
Reported Earlier: Europe Officials Take Documents as Part of Probe Into Alleged Rate Manipulation
By Jean Eaglesham and David Enrich
The European Commission seized documents from several major banks Tuesday, marking the escalation of a world-wide law-enforcement probe into how key interest rates are set, according to people familiar with the matter.
European officials are scrutinizing an interest rate called the Euro Interbank Offered Rate, or Euribor, people familiar with the situation said. Euribor, set by more than 40 banks, is a benchmark used to determine interest rates on trillions of euros worth of euro-denominated loans and debt instruments.
The Euribor probe is an offshoot of a broader investigation under way for more than a year by prosecutors and regulators in the U.S., Europe and Japan. That investigation centers on whether banks colluded to manipulate the more widely used Libor, or London interbank offered rate. Libor influences the cost of trillions of dollars in loans and derivatives.
The Euribor rate-setting panel includes some of Europe's biggest banks. A list of financial firms raided Tuesday by the European Commission, which is the executive branch of the European Union, wasn't available. But among the targets were a large French bank and a large German bank, people familiar with the situation said. The coordinated raids occurred in London and other European cities, these people said.
A spokeswoman for the European Commission declined to comment Tuesday. "It was more of a visit than a raid," said an executive at one bank in London where European Commission officials showed up unannounced. They asked for information and were escorted inside.
European Commission officials have the power to enter buildings and seize documents in investigations of suspected abuse-of-competition laws. The surprise visits, known as dawn raids, are likely part of an effort by European officials to better understand the mechanics of Euribor, according to people familiar with the matter.
Cedric Quemener, the manager of Euribor EBF, the group in Brussels that manages the Euribor interest rate, said he isn't worried about the investigation because Euribor is based on information collected from so many banks. That makes the benchmark interest rate harder to manipulate than Libor, which is set by 15 banks, he noted. "I'm not fearing it," Mr. Quemener said Tuesday, referring to the European investigation.
As part of the Libor probe, U.S. officials have issued subpoenas to a number of banks. The U.S. investigation includes the Justice Department and civil regulators, and investors have filed about 20 lawsuits related to alleged interest-rate manipulation. The banks are fighting the suits.
Japanese officials are examining the rate-setting process for the Tokyo interbank offered rate, or Tibor.
The probe by the European Commission is being conducted by its antitrust unit, led by Joaquin Almunia.
Among other things, investigators are looking at whether banks accurately reported their borrowing costs.
Libor was a lightning rod during the financial crisis as evidence emerged that banks might have understated borrowing costs, possibly to avoid tipping off rivals and investors that they were viewed as more risky than other banks.
The probe also is examining whether traders speculated on future currency movements and colluded with bank-treasury departments to move interest rates in a way that would ensure the bets paid off, according to people familiar with the matter.
In July, UBS said it was granted partial immunity in return for its continued cooperation with the probe. The Swiss bank said it got "conditional leniency or conditional immunity" from the Justice Department's antitrust division and other regulators related to UBS's participation in Libor and Tibor.
Barclays was one of a number of banks to disclose in filings this year that they are under investigation in relation to the Libor probe. The U.S. Justice Department and other authorities are looking at "submissions made by Barclays and other panel members' in relation to Libor, the U.K. bank said in a semiannual filing.
It added: "Barclays is co-operating in the relevant investigations and is keeping regulators informed."