European Regulators See No Need For More Hedge Fund Regulation

by Ulrika Lomas, for LawandTax-News.com, Brussels

15 September 2005

There is no need for further regulation of hedge funds in Europe because the risk to financial market stability that they pose has been largely over estimated, according to the Committee of European Securities Regulators (CESR).

Speaking at a session of the European Parliament's economic affairs committee, Arthur Docters van Leeuwen, Chairman of the CESR, stated that there "is still not a strong case" for regulating hedge funds, which now hold more than $1 trillion in assets globally.

"The prudential impact of hedge funds is not very big and also the effect they have on markets is limited," van Leeuwen said.

Despite their widespread "bad guy" image with many, van Leeuwen argued that hedge funds have a positive role to play in the operation of the financial markets by buying into risk that few other parties are prepared to countenance.

Nonetheless, van Leeuwen accepted that there is a need to "keep an eye" on hedge funds, noting that: "We don't know enough and we would like to know more."

The CESR is an independent regulatory body established by the European Commission in 2001. Its main role is to improve co-ordination among securities regulators; act as an advisory group to assist the EU Commission; and ensure more consistent and timely implementation of community legislation in member states.

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