Britain faces EU squeeze on hedge fund rules; FT

14th May 2010, Comments 0 comments

Britain's new government faces a major test on EU regulation of hedge funds as France and Germany press for a vote on the issue next week, the Financial Times reported on Friday.

Britain opposes the new rules on hedge funds, mostly based in London and widely blamed for at least contributing to the global financial crisis, and wanted the vote delayed, it said.

However, France and Germany have refused and aim to push through the plans next week, setting up an early confrontation with David Cameron's new government, the paper added.

Elena Salgado, finance minister of Spain which holds the rotating EU presidency, said other EU finance ministers would also not agree to a delay.

"We have a sufficient qualified majority," Salgado told the FT.

"There is a very clear majority of countries that want to approve it. After that, there still has to be the dialogue with the (European) parliament (but) our intention is to approve it," she said.

The newspaper quoted a senior, unnamed German official as saying: "We want this put to a vote next week."

It said Britain looks certain to lose out in any vote and so could be forced to accept rules requiring greater transparency from hedge funds and private equity groups.

Some 80 percent of the global hedge fund industry is based in London where it is seen as contributing to the city's standing as one of the world's most important financial centres.

The rules are seen there as being overdone, crimping the industry to such an extent that it may decamp offshore.

The proposed EU directive has also caused concern in the United States, with US Treasury Secretary Tim Geithner warning in March that it could trigger a major dispute by unfairly locking US funds out of European markets.

Under the new rules, hedge fund managers and private equity firms could be forced to curtail the amount of leverage they use, make regular disclosures about their portfolios and be forced to hold their assets with European banks.

Non-EU hedge funds would face similar requirements.

© 2010 AFP

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