EU moves to regulate hedge funds

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EU moves to regulate hedge funds

EU moves to regulate hedge funds
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EU finance ministers have agreed new rules for previously unregulated European hedge funds and other alternative investment firms.

It is part of EU efforts to tighten financial regulations and prevent another economic crisis.

The rules are meant to add transparency, chiefly by putting the sector under the eye of a pan-European supervisory agency.

Michel Barnier, the European official in charge of financial reform, said: “Before, there wasn’t any regulation, any supervision.”

He added: “There is going to be supervision now … European supervision. Lots is going to change.”

The law will extend the range of information private equity and hedge funds must hand over, such as what products and on which markets they are trading.

It also subjects them to summary bans on short-selling, a power slated for the new EU markets agency.

The industry gave the new law a guarded welcome.

“There is still much in the directive that will be difficult to implement and there will be a heavy compliance burden that the industry will have to bear,” said Andrew Baker, head of hedge-fund industry group AIMA.

“But the impact will be far less severe than if something close to the original proposal had been agreed.”

During their meeting, euro zone finance ministers also reached agreement on beefing up the bloc’s budget rules to prevent sovereign debt crises.

Governments that break them will face sanctions only six months after being warned.

The agreement came after Germany backed away from tougher measures.

That did not please some. The Swedish Finance Minister, Anders Borg, said: “We have strengthened the fiscal framework. I am a little bit surprised that we did not have the full 100 percent backing for fiscal discipline from Germany. We could have reached a little bit further

The reform of the rules that underpin the euro is intended to stave off any repeat of the debt problems in Greece this year which threatened the future of the single European currency.