EC probes interest rate fixing system

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THE EUROPEAN Commission said yesterday that it was urgently investigating the national banking association of a European Community country with a view to closing down a system created to help fix domestic interest rates.

The commission did not identify the country or the banking association targeted for action because it wanted to notify the authorities in that country first.

But late yesterday the Luxembourg Bankers Association said it published the kind of information on bank profit margins to which the commission objected.

'If (the commission) has a problem with it we can stop it tomorrow, but we don't see any reason why they should have a problem,' a spokesman said.

The commission said that the system in question 'calculated a national margin and an international margin to evaluate the profitability of the banks' investment transactions in order to indicate the level at which to set interest rates for borrowing and lending'.

The statement was the result of a year-long inquiry ordered by Sir Leon Brittan, the competition commissioner, to obtain information on any interbank agreements concerning interest rate fixing.

A spokesman for the British Bankers Association said yesterday: 'The BBA can confirm that it replied to the commission inquiries. There are no interest rate agreements in the UK and we are not at all surprised that a commission source says that the BBA is not under investigation.'

The commission said the Portuguese banking association was found to calculate indicative rates, but no action was planned.