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EU raids banks amid suspicions they colluded to manipulate Euribor derivatives
BRUSSELS (AP) ' The European Union's competition watchdog said Wednesday it raided several banks' offices in search of evidence that they may have colluded to manipulate euro interest rate derivatives.
The European Commission said it is looking into a possible cartel by companies active in the sector of derivatives linked to the Euro Interbank Offered Rate ' the interest rate banks charge each other for loans in euros.
The Commission said the raids started on Tuesday, but didn't name the firms whose premises it inspected.
There are trillions of euros in derivatives whose value is based on developments in the Euribor and they make up a significant slice of the profitable business of derivatives trading, which has grown exponentially in recent years.
The Euribor is set by a group of 44 banks and is based on the interest rates they charge for lending to other financial institutions.
Inspections, during which investigators collect documents that could aid their case, are an early step in EU competition probes and happen before the Commission starts an in-depth investigation into suspected cartels and other violations of EU competition law.
The European Banking Federation, a Brussels-based trade association that manages the setting of Euribor, said it acknowledges the inquiry "with serenity."
"We have nothing to hide," Guido Ravoet, the chief executive of the EBF said in a statement. "We ensure the good governance of Euribor-EBF and the close monitoring of the benchmark. We operate in full transparency and I believe that the large number of banks which take part in our panel (44) should be a guarantee against possible agreements."
The inspections are another sign that competition watchdogs are stepping up their scrutiny of the financial sector as a result of the 2008 credit crunch and the European debt crisis.
Press reports earlier this year said that the U.S. Justice Department and Securities and Exchange Commission were looking into suspected manipulation of the London Interbank Offered Rate, which is a benchmark rate similar to the Euribor but used much more widely.
Earlier this year, the European Commission also opened an investigation into practices of some of the world's largest banks in the market for credit default swaps, derivatives that act as a sort of insurance against default.