UK and Europe heading for rift over regulation

[FarCenter]

By Louise Armitstead - 30 Apr 2009 - http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/5246128/UK-and-Europe-heading-for-rift-over-regulation.html

The European Commission has been accused of launching a "blatant attack" on London's financial services industry with proposals to regulate hedge funds and private equity firms.

The directive looks set to open a deep divide between the UK – where over 80pc of the alternative investment industry is based – and the rest of Europe. The proposals include radical new rules ranging from fund raising to capital requirements. The directive is particularly tough on non-European fund operators. It stipulates that only funds domiciled in Europe can be marketed in the EU. An estimated 90pc of hedge funds are domiciled off-shore while the industry is also dominated by Amercian players.

Antonio Borges, chairman of the Hedge Fund Standards Board, said: "This is a blatant attack on the UK and US financial systems by continental countries that neither have a tradition of alternative investments nor a proper understanding of them. With the European elections coming up this is clearly politicial." Steven Whittaker, partner at Simmons & Simmons said: "This is a deeply protectionist directive and damaging for the UK which attracts the international players."

But in Europe the directive was criticised for not going far enough. Poul Nyrup Rasmussen, a Danish MEP and president of the Party of European Socialists who led the parliamentary pressure for the new rules, said the commission had come forward with regulation that was "so light, it's flyweight". He said: "Private equity can pop the champagne today but they may not be celebrating for long as we will not accept such an ineffective regulation."

Charlie McCreevy, EU commissioner, said the directive was necessary to address the concerns following the financial crisis. He said: "There is now a global consensus – as expressed by the G20 leaders – over the need for closer regulatory engagement with this sector. In particular, it is essential that regulators have the information and tools necessary to conduct effective macro-prudential oversight."

The directive proposes imposing "demanding regulatory standards" on all managers with funds over the value of €100m (£89m). The regulations will also extend to "all major sources of risks in the alternative investment value chain" including "key service providers ... depositaries and administrators". The directive says they will be "subject to robust regulatory standards".

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[ananda]

1. Stand tough, Europe.

We need your example.

[muriel_volestrangler]

2. Note that the only UK quotes come from the financial services industry

there's no quotes from the UK government (though New Labour have admittedly given the financial industry pretty much whatever it wanted, in the past); when the Telegraph says "the UK", it really means "the rich people who would be regulated".

Here's the Reuters story with the quotes that the Telegraph used for much of their article. It actually does include a British government spokesman:

UK TREASURY SPOKESMAN

"We hope that as these proposals develop we can continue to build upon the work agreed at the G20 and work with international partners globally to develop ways to counter risks and ensure hedge funds are subject to appropriate regulation and oversight.

"We must maintain our commitment to this global approach while producing legislation, which enhances the EU's competitiveness. We look forward to working with our European partners to develop this legislation and ensure it delivers all the necessary new safeguards."

http://uk.reuters.com/article/businessNews/idUKTRE53S54820090429?sp=true

So, I think the Telegraph is making up this 'rift'. The UK government seems to think the proposals can be worked with. The Torygraph is just spinning on behalf of the rich people who read it.

[FarCenter]

3. True, but the financial industry in London probably agrees with Torygraph

See "London’s ‘Twin Pillars of Doom’ May Spark Hedge Fund Exodus"

http://www.bloomberg.com/apps/news?pid=20601109&sid=aIjy4wLC4eJA&refer=home