European Commission initiated unexpected raids at banks

The European Commission (EC) impounded documents from several major banks Tuesday, to see how key interest rates are set, according to people familiar with the matter, The Wall Street Journal informs. Among other things, investigators are looking at whether banks accurately reported their borrowing costs.

Euro Interbank Offered Rate, or 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 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. 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. 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. The probe by the European Commission is being conducted by its antitrust unit, led by Joaquin Almunia.

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