European Commission competition inspectors have raided the head offices of AIB and Bank of Ireland in Dublin and banks in Holland and Belgium over concerns that banks have been collaborating to overcharge customers for converting currencies within the euro zone.

Both Irish banks have confirmed that they have received visits from the inspectors and have co-operated fully with their investigations. Both banks have also insisted that there is no question of collusion in setting currency conversion charges, emphasising that their charges have to be approved by the Office of the Director of Consumer Affairs.

An AIB spokesman said: "We welcome the inspectors and we are happy to co-operate. Our prices are open and transparent. We showed them what they wanted to see and the records in relation to the areas they were looking at. We were quite happy to co-operate with them."

He added: "We made significant reductions in charges with the introduction of the euro and we have continued to do so since. The spread of prices between the institutions in Ireland shows clearly that there is no question of collusion on charges." An investigation had revealed wide differences in pricing between the banks, suggesting that there was no cartel in operation.

The AIB spokesman said that the bank had "substantially" reduced its conversion charges with the introduction of the euro last January.

A spokesman for Bank of Ireland said: "We don't have any concerns. The move was well signalled, it is their legal entitlement and we have co-operated fully. With the structures that are in place here, where institutions have to submit any changes in charges to be approved by the Director of Consumer Affairs, I believe we are in better nick than many other European countries."

Mr Felix O'Regan, the Irish Banking Federation's information services manager, said the investigation was not unexpected following the one earlier this year in other euro-zone countries. "At the widest industry level, we would be very confident that there would be no grounds for any shortcomings or infringements of competition rules," he said.

He said the basis for that confidence was the direction given by the Director of Consumer Affairs, Ms Carmel Foley, that banks notify her office and publish their charges in the national press on the one day for comparison purposes.

Ms Foley said last night that there was no evidence of collusion among the banks based on the notifications she had received. "At the same time, I believe we could do with more competition in the Irish market," she said.

The anti-trust officers are being assisted by some officers from the Competition Authority, which was informed of the impending investigation earlier this month. Mr Ciaran Quigley, assistant principal, said it was normal practice for the Competition Directorate to seek the assistance of the competition authority of the member-state in examining documents and files or compiling any evidence in an investigation. A Central Bank spokesman said that it had not received formal notification of the investigation, but it would not expect any because fees and charges relating to currency transactions came under the remit of the Director of Consumer Affairs.

The raids on banks in Ireland, Holland and Belgium follow similar inspections at eight banks in Germany, France, Italy and Spain last February. While bilateral exchange rates were fixed on January 1st when the single currency was launched, meaning that there is no longer any exchange rate risk, banks have been allowed to continue to charge for converting currencies on the basis of a transaction charge meant to cover the administrative costs alone. The Commission has acted on complaints from customers and politicians that the rates charged were excessive and that the banks were operating as a cartel. Fines from €20 million upwards can be levied under the EU competition guidelines of 1997. "We suspect that there are agreements, price cartels in the memberstates concerning bank fees for exchanging currencies to convert cash and money transfers since the introduction of the euro," an EU spokesman stated. There is no timetable for completing the EU investigations.

The news came one day after the European Competition Commissioner, Mr Mario Monti, told a European Parliament committee that he had asked his staff to speed up an investigation into whether banks have been colluding on charges for exchanging currencies in the euro zone. The Commission has made the currency exchange issue a top priority to ensure consumer confidence in the euro ahead of the arrival of banknotes and coins in 2002.

Mr Monti's predecessor, Mr Karel van Miert, said that the original searches had to be confined to the leading banks in France, Germany, Italy and Spain due to limited staff resources.