EU FINANCE ministers have approved draft legislation to escalate the regulation of private equity and hedge funds, a far-reaching package which includes measures resisted by the Government.
At their monthly meeting in Brussels, the ministers gave a negotiating mandate to Spain’s rotating presidency of the EU to agree by July a definitive set of rules by reconciling its draft with parallel proposals adopted on Monday night by a committee of the European Parliament.
The meeting in Brussels yesterday also heard concerns from the Swedish, Dutch, French and British ministers about the possible erosion of parliamentary prerogatives from EU economics commissioner Olli Rehn’s proposal to strengthen budgetary surveillance and deepen economic co-ordination.
The commissioner said, however, that he was “encouraged” by the feedback he received. This is perceived to reflect broad support for the drive to intensify budgetary surveillance if not to bypass parliaments.
Many expressed the view that it would be possible to achieve stronger central oversight before governments sign off on budgets without undermining their parliaments.
The ministers will resume their deliberations at a meeting chaired on Friday by European Council president Herman Van Rompuy, who has a mandate to explore possible changes to the EU treaties.
The euro zone countries yesterday released €14.5 billion in emergency bilateral loans to Greece and the International Monetary Fund released €5.5 billion. Germany lent €4.43 billion, France €3.33 billion, Italy €2.92 billion, Spain €1.94 billion and the Netherlands €932.5 million.
Ireland will participate in the three-year initiative – possibly for a total of €1.3 billion – but only after legislation is enacted.
The move against hedge funds marked a setback for the British authorities, who pushed to radically dilute measures they said would damage the City of London financial centre. It marks a step forward for EU internal markets commissioner Michel Barnier, who is advancing separate plans to regulate derivative markets, reform credit rating agencies and overhaul corporate governance generally.
French MEP Jean-Paul Gauzes, who sponsored the parliament’s regulation Bill, said negotiations on the final package “will be difficult”.
Hedge fund regulation is highly sensitive for the European authorities, given acute concern that speculators intensified the refinancing difficulties faced by Greece, Spain and Portugal.
The new rules would impose transparency standards on hedge fund managers based outside of the EU, set restrictions on investment managers’ bonuses and on the use of debt.
Minister for Finance Brian Lenihan had campaigned against provisions in the new directive on valuation liability and depositary liability, arguing that they had the potential to dim Ireland’s lustre as a big back-office hub for fund operators. These provisions remain intact in the draft law adopted by ministers.
“While we continue to have concerns about the draft proposals on the liability of depositaries and valuers, Ireland agreed with the general approach adopted today,” said a Government spokeswoman.
“Over the course of negotiations with the European Parliament, we expect that outstanding issues can be resolved and agreement can be reached on these new rules to regulate hedge fund managers.”
The Government argued that the draft directive could see valuers held responsible for drastic changes in the value of investment assets due to circumstances beyond the control of the fund. Such responsibility should properly rest with the fund manager, it argued.
