McCreevy Denies Plans To Toughen Hedge Fund Regulation

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

26 May 2005

Speaking to reporters on Monday, Internal Market Commissioner, Charlie McCreevy revealed that despite calls from EU member states such as Germany to toughen the regulation of hedge funds, he is in favour of leaving the situation as it is for the moment.

The EC is reported to be considering a review of the hedge fund industry in Europe in order to decide whether a new regulatory framework is necessary, and earlier this month, as the backlash to the Deutsche Boerse boardroom coup continued, German Finance Minister Hans Eichel said that he agreed with Chancellor Gerhard Schroeder that hedge funds should be subject to additional scrutiny.

Eichel announced that he wanted German standards of regulation to apply across Europe, arguing that:

"I want a Europe-wide supervisory body for hedge funds based on the German model. What we have managed to achieve in the German market to improve regulation and transparency I would like to see exported."

He added: "In this way we could minimise the risk from certain black sheep among hedge funds, who are only out to maximise their profits in the short-term."

The coup at Deutsche Boerse, which saw investors in Deutsche Boerse remove Chief Executive Werner Seifert and Chairman Rolf Breuer, led German Chancellor Gerhard Schroeder to consider legislation to limit the power of hedge funds. Schroeder told an SPD policy forum that tighter controls and greater transparency may be needed, and asked the finance and economy ministries to look into the issue.

Commerzbank Chief Executive Klaus-Peter Mueller also weighed into the affair, saying that hedge funds should face the same regulation on capital requirements and management as banks, and called for international action:

"It's hard to understand that small credit institutions face strict oversight, while hedge funds that have a much more significant financial impact are not regulated beyond having to register an address," he observed.

However, addressing the issue earlier this week, Mr McCreevy announced that:

"I am quite open-minded about it. I don't think we should have a situation in the financial markets where we have excessive regulation of hedge funds."

He went on to add that:

"We are not planning at the present to introduce any new regulation in this area."

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