The wreckers are gaining ground
The City appears to be girding its loins for a real fight - at last. This sector being targeted - especially by Sarkozy’s France - is vital for Britain and a source of envy from across the channel. This is a deliberate attempt to wreck the City of London as the world’s leading financial centre. It matters to all of us.
Christina Speight
TELEGRAPH 23.6.09
City warns EU rules are a threat to UK economy
The City of London has warned that new European regulations could ride roughshod over the interests of the UK, where the financial services sector employs more than 1m people and generates billions of pounds in income.
By Helia Ebrahimi
In an outspoken attack on the accord signed last week to create an EU regulator, the City of London Corporation said the Brussels’ legislation posed a dangerous risk to the success of the economy.
Stuart Fraser, chairman of the Corporation’s policy and resources committee, said: “We have lost the broader argument about ceding control of UK rules to the EU, though we are happy that some concessions have been made.
“We now still have a situation where binding arbitration dictated by Brussels could overrule the UK’s Financial Services Authority.”
Last week’s summit in Brussels saw 27 European leaders sign a draft agreement that would see three European supervisory authorities set up to oversee banking, insurance and securities. Though these bodies do not have the power to force financial consequences, such as a banking bail-out, they do have recourse to binding arbitration – which means the City watchdog may yet have to kowtow to their edicts if there is a conflict with another national regulator.
Mr Fraser said: “We will have to see what exactly is meant by these general terms and how the power is used.”
Mr Fraser also added his voice to fears that planned European regulations could lead to an exodus of hedge funds from the UK.
The EU Alternative Investment Directive, issued last month, has been heavily criticised by hedge funds, which claim parts of the directive – including debt restrictions and only European domiciled firms being able to market to EU investors – would be unworkable.
It has provoked a battle with the UK’s multi-billion pound hedge fund community which has warned it might have to move overseas, to New York or Geneva unless the proposals are watered down.
Mr Fraser said the European Council was absolutely right to decide more time was needed to discuss the proposed legislation. “Europe does not like private equity or hedge funds and seems hell bent on driving these industries out of Europe. Here in the UK we see their role as vital and with 85pc of hedge funds operating out of London, if the legislation is not radically changed the cost to the British economy will be huge.”
The UK hedge fund industry’s response is being co-ordinated by trade body the Alternative Investment Management Association (AIMA ) and a number of prominent hedge funds have set up a steering committee. Man Group, Marshall Wace and Lansdowne Partners are on the committee.
AIMA has welcomed a report from the International Organization of Securities Commissions proposing new global regulations for hedge funds, including large hedge funds reporting information to their national regulators concerned with systemic risk.
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