The Hedge Fund attacks from Brussels (orchestrated from Paris) are being completely ignored by Brown and our non-government who will sell Britain out in return - for what? Flatterry? Bribery? Blandishments from Mandelson as our EU-appointed surrogate governor ?
It seems once again, however, that there is one law for the French and Germans (plus their proteges) and another for Britain. How much longer will Brown stomach this indignity?
Christina
FINANCIAL TIMES
9.7.09
London mayor attacks EU hedge fund plan
By Bob Sherwood, London and South-East Correspondent
Contentious European plans to regulate hedge funds could start “a flood” of ill-conceived financial regulation from Brussels, Boris Johnson, the London mayor, will warn on Thursday as he seeks to take the lead in opposing the proposals.
Mr Johnson will wade into the growing storm of protest over the draft European law amid claims that ministers have so far done too little to counter the perceived threat to the City’s hedge fund and private equity sector.
Mr Johnson was lobbied heavily by senior City figures in a meeting on Tuesday, where leading hedge fund managers told the mayor they would stop operating in London and move overseas if the draft Alternative Investment Fund Management directive became law.
On the same day, Lord Myners, the City minister, criticised the plan, saying the draft directive needed “major surgery”.
But Mr Johnson says the government has been slow to wake up to the threat. Anthony Browne, the mayor’s policy director, said ministers had been “asleep on the watch”.
The directive is a response to public anger over excessive risk-taking that led to the financial crisis but Mr Johnson is concerned that further clampdowns will follow. He will tell a London economic conference on Thursday: “No other European city’s financial services sector is competing on the same international level ... and the European Commission must recognise this.”
About 80 per cent of Europe’s hedge funds and 60 per cent of its private equity funds are based in London, according to the industry. The proposed law could force hedge funds and private equity firms to register with regulators and disclose more details about their businesses. It could make it harder for US-based funds to operate in Europe and more cumbersome for UK-based funds to market themselves in other European countries.
Those who met Mr Johnson to enlist his support this week included Andrew Baker, chief executive of the Alternative Investment Management Association, Paul Marshall, chairman of Marshall Wace, Gerry Murphy, chairman of Blackstone Group, James Vernon, chief operating officer of Brevan Howard Asset Management, and Simon Walker, chief executive of the British Private Equity and Venture Capital Association.
Mr Browne said: “MEPs from countries that have no hedge funds or private equity are voting on this legislation on an industry they don’t understand and they have no vested interest in the outcome.”
BBC Radio 4 ‘Today’ at 0720 9.7.09
Boris: European plans to regulate hedge funds "very dangerous to City"
• Boris Johnson, Mayor of London
Mr Johnson criticised European plans to regulate hedge funds, warning that the move was “very dangerous” to the City and “profoundly against the interests of Europe”.
He described the plan as “very badly thought out...or thought out with malign intent”, and added “the commission seeks to attack something in which London excels”.
He said that 80% of hedge funds are situated in Britain, and warned the plans were “very dangerous to the City” and “profoundly against the interests of Europe”.
He added: “It is very important that we defend an industry that creates a huge amount of tax for this country.
“If you do undermine their competitive advantage...you simply hand that advantage to other cities around the world.”
FINANCIAL TIMES
9.7.09
Global Insight: Germans open can of worms
By Gillian Tett in London
What are the Germans trying to hide? That is a question which has been furtively muttered in several European capitals, as the implications of a recent tussle about bank reform have sunk in.
European finance ministers agreed this week to reform bank capital and accounting rules. And while many of the technical details of this reform are complex, and thus likely to excite only geeks, what has grabbed attention – even from non-geeks – is that Germany used this debate to lobby for a temporary loosening of the bank capital and accounting rules.
Officially, this was sparked by a desire to give German banks enough leeway to make more loans: in reality, though, it also appears to be driven by a desire to avoid too much transparency on bad loans.
And while Berlin’s request was rebuffed, the tussle has reinforced a growing impression that Germany remains intent on pursuing a policy of forbearance towards its troubled banks – in the matter of accounting and capital rules, and much else. [The Landesbanken are notorious for sitting on and hiding vast accumulations of toxic debts and the German government is desperately trying to keep this hidden - at least until after the September elections -cs]
If so, it has plenty of historical company. After all, when bank crises have exploded, western policymakers have often tried to bend, or suspend, the accounting and regulatory rules.
When Latin American debt exploded back in the 1980s, for example, the American government used tacit forbearance and allowed groups such as Citibank to avoid recognising their losses for several years – and thus amortise the shock.
In London during the same period, the Bank of England developed an informal “matrix”, which also permitted the British banks to report and write off just a small proportion of their losses each year. Then, last decade, Japan initially took a similarly lenient approach when its banks became engulfed in bad loans.
No one should be too surprised, perhaps, that the Germans’ instincts now look somewhat Japanese. After all, as early as August 2007, Axel Weber, Bundesbank president, told his counterparts at a conference in Jackson Hole, US, that there was little need to mark triple-A-rated structured products to (falling) market prices, since these instruments were unlikely ever to suffer real losses.
Since then most German banks, particularly Landesbanken, have continued to record the value of their credit assets at book, not market prices, even as banks in countries such as the US have marked these down.
Thus, while the IMF informally reckons that German banks sit on hundreds of billions of euros of losses, much of this has never been reported – to date.
“The state owns much of the system, and so we can take a long-term view,” one senior German regulator explained to me a few months ago.
What makes Germany’s position intriguing is that it, unlike Japan, is not a policy island. It is part of the EU. Much of the western world has embraced the ideal of mark-to-market accounting – together with a goal of promoting more, not less, harmonisation of international accounting rules.
In reality, though, even before this week’s tussle with Germany, any drive towards harmonisation was starting to go into reverse. The Financial Accounting Standards Board announced this year, for example, that it was giving banks more leeway over how it valued illiquid assets – and took that move under strong pressure from US politicians and without any prior consultation with the International Accounting Standards Board.
And while both the IASB and FASB are now trying to brush over that embarrassing incident, the fact that bodies such as the European Commission are now weighing into the banking reform debate could undermine international co-ordination.
Meanwhile, Germany’s move opens a new can of worms. In the short-term, of course, Berlin’s appeal for laxity was rebuffed.
But with an election brewing, and the economy remaining troubled, the temptation for German forbearance will not disappear. Nor will the pressure towards policy fragmentation in the financial sphere – even amid all the pious rhetoric about co-ordination in this week’s G8 meeting.
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