Thank heaven for small mercies. Sweden will chair the coming meetings on the issue - vital to Britain - of hedge funds and private equity. They, at least know what they are talking about , and see the dangers of plunging ever deeper into a socialist centrally controlled miasma.
Imagine this six months on when Socialist Spain is in the chair or a year’s time when Belgium takes over ! This battle will determine the future of London as the world's premier financial centre
Christina
EU OBSERVER
2.7.09
Sweden warns against 'overzealous' hedge fund regulation
Andrew Willis
As members of the European commission gathered in Stockholm to mark the start of the Swedish presidency on Wednesday (1 July), the country's financial markets minister warned against overregulation of the hedge fund and private equity sectors.
"It is not private equity that caused the crisis, nor hedge funds. But in some countries, the political debate portrays private equity and hedge funds as the problem," said Mats Odell.
"That's not the same as saying we shouldn't regulate them. But the aim is to have sound regulation and not to kill the industry," he added.
Mr Odell's comments will provide some much needed cheer to the EU's hedge fund and private equity industries - largely based in London - who are concerned that draft legislation produced by the European commission in April could drive them out of business.
The commission's draft directive on alternative investment fund managers (AIFM) will require managers of hedge funds and private equity firms to register with their home member state authorities.
Added to this, managers will also have to disclose information on borrowing to regulators and notify authorities about the markets and assets they plan to invest in. The aim is to prevent a build up of risks that could destabilise Europe's financial system.
As part of the April financial package, the commission also put forward a recommendation on reducing executive pay and another on remuneration for risk-taking staff.
The non-binding recommendations invite member states to ban severance pay for directors, known as "golden parachutes," in cases of poor performance, and promote the use of long-term performance criteria when deciding annual remuneration.
Autumn tussle
Sweden has signalled that securing agreement on financial regulation and a new supervisory network will be a chief component of its six-month presidency, along with tackling the economic downturn and climate change.
The original release of the commission's AIFM directive was delayed as member state governments wrangled over leaked drafts this spring, with France, Germany and the Socialists in the European parliament calling for strict new rules.
Wednesday's comments by Mr Odell suggest Swedish allegiances may lie closer to the UK and industry positions however, setting up a potential tussle this autumn when member states are due to debate the commission plans.
"There is an exaggerated fear that private equity contains big systemic risk. Our opinion is that it does not," said Mr Odell.
And while the industry is preparing for a major lobbying offensive to have the proposals watered down, Socialists in the European parliament have already signalled that the current draft directive does not go far enough in their view.
Following the April publication, Socialist president Poul Nyrup Rasmussen said the directive "has more holes than a Swiss cheese" and would have political consequences for commission president Jose Manuel Barroso's chances of securing a second term.
Mr Barroso's bid for another five years already appears to have influenced the proposals, and speaking with the Swedish Prime Minister Fredrik Reinfeldt at the opening of the Swedish presidency on Wednesday, Mr Barroso was at pains to play down his market-friendly credentials.
"I am not a neo-liberal. I am a central reformer," he told journalists.
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