HEDGE FUNDS and private equity funds should be monitored closely but there are no plans to propose regulation, European internal market commissioner Charlie McCreevy said last night, sparking anger from left-wing lawmakers.
The commissioner told the European Parliament it was the heavily regulated sector of the financial services industry, including banks, that had been allowed to "run amok with little-understood securitisation vehicles". "I don't believe it is necessary at this stage to tar hedge funds and private equity with the same brush as we use for the regulated sector," said Mr McCreevy.
EU lawmakers are set to adopt a report calling on Mr McCreevy to come forward with a legislative proposal to toughen oversight of hedge funds and private equity companies as part of a wider proposal covering all financial firms.
"Now it's time to act," former Danish prime minister Poul Nyrup Rasmussen, the author of the report and a member of the socialist bloc, told parliament.
"We have seen in the US what happened. And someone says it's not as bad in Europe as it is in the US. I would only say the HBOS, Northern Rock and many other cases are enough for me to act."
Not all hedge fund activities should be seen as a threat to markets, Mr McCreevy said. "Let me be clear, the EU economy is going to need massive investment in the time ahead. Without sovereign wealth funds, private equity and the like, Europe's recovery from today's turmoil will be all the slower," he said.
The European Private Equity and Venture Capital Association said any regulation should be subject to cost-benefit analysis, and welcomed Mr McCreevy's prudent approach.
The report, to be voted on by the full parliament this week, has been watered down from Mr Rasmussen's original draft after tough negotiations with the bloc's centre-right groups and Liberals.
It calls for mandatory capital requirements for all financial institutions and a better alignment of reward packages in the sector to reflect losses as well as profits.
It also asks for measures to avoid unreasonable asset stripping in target companies. Mr McCreevy dismissed accusations that he was doing nothing, saying he will propose tougher bank capital requirements rules and oversight of credit rating agencies. - ( Reuters)
