THE EUROPEAN Commission yesterday proposed that a loose set of principles be established to govern sovereign wealth funds, estimated to cover assets of up to $3 trillion worldwide.
While emphasising that Europe was "open for business", internal market commissioner Charlie McCreevy said the government-controlled funds should adhere to "some common principles on transparency and good governance".
"Sovereign wealth fund countries must acknowledge that their growing weight in global financial markets brings responsibilities," said EU monetary affairs commissioner Joaquin Almunia.
Some estimates suggest the cash pile from such funds could grow to $12 trillion by 2015.
The commission was keen to stress that it was against restricting investment by legislation, but did not rule that "reserve" option out.
It also underlined that, despite fears that the sovereign funds may in the future be used for geopolitical goals, they have had a clean 30-odd year run until now.
"Let's be brutally frank about this. Sovereign wealth funds have been positive and long-term investors . . . there is no, as far as I am aware, no instance of sovereign wealth funds acting in any manner other than responsibly up until now," said Mr McCreevy.
"Some people are afraid of what might happen in the future," he added.
With the current turmoil on the global financial markets, governments have become jittery about the funds, fearing that some operate in an opaque manner, without revealing the extent of their assets or their investment objectives.
Sovereign wealth funds originating from China and the Middle East have recently taken stakes in some of Wall Street's biggest banks.
The European Commission is suggesting that EU leaders - due to discuss the issue at a summit in Brussels next month - adopt a common position on the matter that would contribute to international talks on the funds.
Member states themselves are split on the issue, with the commission keen to avoid a fragmented approach by the bloc. While Britain favours a hands-off approach, France would like to take a more regulatory path.
The principles include commitments to an open investment environment; transparency and proportionality; and respect of EU treaty obligations.
