http://www.telegraph.co.uk/finance/n...-controls.html
EU agrees hedge fund controls
European leaders have agreed on draconian measures to crack down on hedge funds, rating agencies and all financial instruments, going beyond proposals by Prime Minister Gordon Brown for soft regulation designed to avoid stifling free enterprise.
The move to regulate hedge funds poses a potential threat to an industry that has been a mainstay of London's financial growth over the last decade. The only restriction imposed so far is an obligation to disclose all "short" positions on equities.
German Chancellor Angela Merkel, who hosted yesterday's summit of German, French, Italian, Spanish, Dutch and British leaders in Berlin, said the sort of rampant speculation and misuse of leverage that occurred in the credit bubble would not be tolerated.
"We have today underscored our conviction that all financial markets, products and participants must be subject to appropriate oversight or regulation, without exception and regardless of their country of domicile. This is especially true for those private pools of capital, including hedge funds, that may present a systemic risk," she said.
The purpose of the gathering was to thrash out a common EU policy in advance of London's G20 summit in April, when world leaders aim to set the foundations of a new financial order for the 21st century.
The exact details of the accord will not be released until all EU states have reviewed the text but the proposals are clearly more radical than the UK Treasury's plan for calibrated measures.
Diplomats say Mr Brown agreed to restrictions on hedge funds in order to clear the way for an accord.
Speaking afterwards, Mr Brown said the summit backed efforts to boost the fire-fighting reserves of the International Monetary Fund.
"We need international action to help, for example, in central and eastern Europe, where a number of foreign banks have withdrawn to their home banking territories and where it is difficult to recapitalise the rest of the banking system. So we are proposing today a $500bn (£346bn) fund that enables the IMF not only to deal with crises when they happen but to prevent crises," he said.
The EU communique also called for punitive action against tax havens. "A list of uncooperative jurisdictions and a toolbox of sanctions must be devised as soon as possible," it said.
French president Nicolas Sarkozy said Europe would not accept a "cheap fix" on financial regulation. "We want regulation of hedge funds, and we're not going to put up any longer with the bonus reward system of traders and bankers. Sanctions are key. Without sanctions, new regulations are meaningless," he said.
The concerted attack on hedge funds is ominous for the City, which commands 21pc of global hedge fund business and four-fifths of Europe's total. While the UK's 900 funds have taken a beating over the last 18 months, they have fared better than banks. Their average leverage is far lower, and though down 19pc last year, they easily beat global stock indexes
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Surely Gordon would not be stupid enough to let the city be effectively moved to somewhere outside the EU?
EU agrees hedge fund controls
European leaders have agreed on draconian measures to crack down on hedge funds, rating agencies and all financial instruments, going beyond proposals by Prime Minister Gordon Brown for soft regulation designed to avoid stifling free enterprise.
The move to regulate hedge funds poses a potential threat to an industry that has been a mainstay of London's financial growth over the last decade. The only restriction imposed so far is an obligation to disclose all "short" positions on equities.
German Chancellor Angela Merkel, who hosted yesterday's summit of German, French, Italian, Spanish, Dutch and British leaders in Berlin, said the sort of rampant speculation and misuse of leverage that occurred in the credit bubble would not be tolerated.
"We have today underscored our conviction that all financial markets, products and participants must be subject to appropriate oversight or regulation, without exception and regardless of their country of domicile. This is especially true for those private pools of capital, including hedge funds, that may present a systemic risk," she said.
The purpose of the gathering was to thrash out a common EU policy in advance of London's G20 summit in April, when world leaders aim to set the foundations of a new financial order for the 21st century.
The exact details of the accord will not be released until all EU states have reviewed the text but the proposals are clearly more radical than the UK Treasury's plan for calibrated measures.
Diplomats say Mr Brown agreed to restrictions on hedge funds in order to clear the way for an accord.
Speaking afterwards, Mr Brown said the summit backed efforts to boost the fire-fighting reserves of the International Monetary Fund.
"We need international action to help, for example, in central and eastern Europe, where a number of foreign banks have withdrawn to their home banking territories and where it is difficult to recapitalise the rest of the banking system. So we are proposing today a $500bn (£346bn) fund that enables the IMF not only to deal with crises when they happen but to prevent crises," he said.
The EU communique also called for punitive action against tax havens. "A list of uncooperative jurisdictions and a toolbox of sanctions must be devised as soon as possible," it said.
French president Nicolas Sarkozy said Europe would not accept a "cheap fix" on financial regulation. "We want regulation of hedge funds, and we're not going to put up any longer with the bonus reward system of traders and bankers. Sanctions are key. Without sanctions, new regulations are meaningless," he said.
The concerted attack on hedge funds is ominous for the City, which commands 21pc of global hedge fund business and four-fifths of Europe's total. While the UK's 900 funds have taken a beating over the last 18 months, they have fared better than banks. Their average leverage is far lower, and though down 19pc last year, they easily beat global stock indexes
===============================
Surely Gordon would not be stupid enough to let the city be effectively moved to somewhere outside the EU?
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