These two items show The City under threat. It is inconceivable that the Hedge Funds will capitulate and I doubt that many will remain in the EU or even Europe.
On pensions the proposals would kill the whole pension provision system that we have here. Lord Myners - co-opted by Brown from the City - is one example of a Labour minister doing some good and fighting for Britain. The EU-Parliament is in a thoroughly anti-British mood and the prevailing attitude in the Council and the Commission is for ever tighter bureaucratic control.
Christina
================================
FINANCIAL TIMES 13.11.09
Hedge funds stars face big pay crackdown
By Sam Jones, Kate Burgess and Brooke Masters in London
European hedge funds face a more severe crackdown on pay than bankers, according to last-minute changes this week to forthcoming EU regulations for the alternative investment industry.
A copy of the latest revision of the EU’s controversial new Alternative Investment Fund Manager directive, dated November 12, obtained by the Financial Times, now includes a three page annexe of provisions restricting remuneration policies.
The proposed new rules include restrictions that may prevent fund managers from cross-subsidising their internal revenue streams.
Such a measure would prohibit fund managers from using fees earned from successful parts of their businesses to pay staff working in areas that are not performing so well.
New measures also include rules for hedge fund employees to defer up to 60 per cent of their pay over as much as three years.
Large hedge funds and private equity firms will meanwhile be required to establish independent remuneration committees.
Several of London’s biggest funds said they were consulting legal advisers on the proposals.
“Whilst the new proposed remuneration policies look a lot like those that apply to the biggest banks, even medium-sized banks or big broker/dealers are not caught by the details in the way that hedge fund managers will be,” said Rob Moulton, a partner at the London law firm Nabarro Nathanson.
“Telling a star hedge fund manager that they will need to defer 60 per cent of their bonus is hardly likely to make them want to stay within the EU in what is quite a mobile industry.”
The document has been drawn up by Sweden, the current holder of the European council presidency and is regarded by many as a workable compromise after months of wrangling between politicians and industry insiders.
Many have welcomed news of the latest changes.
Several substantial bones of contention present in previous versions of the directive – such as restrictions on funds’ use of leverage and stringent marketing requirements – have been modified.
----------------------------------------------------------------------
Additional reporting by Martin Arnold
============AND ---------->
2. Myners backs insurers over EU capital rules
By Paul J Davies, Insurance Correspondent
Lord Myners has issued a warning that new European capital rules for insurance companies could discourage people from saving for retirement by cutting the value of pensions.
The City minister said in a speech yesterday at the Association of British Insurers that the government had "a social duty" to get involved by supporting the industry in negotiating the rules in Europe.
It is the first time a member of the government has spoken out publicly about the issue. Since last year some industry members have been claiming that the rules, which are to take effect in 2012, could cut the value of defined contribution pension schemes by up to 20 per cent because of the effect on their annuity businesses.
In August the ABI sent a letter to Alistair Darling, chancellor, warning that the rules could force UK insurers to raise £50bn in fresh equity, doubling their capital bases.
"Capital must be sufficient to provide security and assurance, but setting capital at an excessively conservative level will have very real consequences in terms of dis-incentivising retirement provision and adversely impacting pensioner income," Lord Myners said.
The arguments around how the changes to the discount rate that insurers use to value their future payouts to pensioners are highly technical, but Lord Myners said that for all the complicated talk, "we must be crystal clear that the risk here is increased costs for pension businesses, and ultimately pensioners".
"We absolutely cannot allow this to happen," he added. "Government is committed to ensuring that these regulatory reforms do not unintentionally impact the lives and well-being of pensioners in the UK and elsewhere in Europe."
Tim Breedon, chief executive of Legal & General, one of the companies that would be hardest hit by the rules, welcomed "Lord Myners' effort and commitment to achieving the right result in Europe for UK savers and pensioners, and for the industry, on Solvency II".
"The direction of travel is now more positive . . . but sustained effort will still be required to build a panEuropean consensus on capital issues, therefore ensuring future pensioners are not disadvantaged," he said.
Peter Vipond, director of financial regulation at the ABI, said he agreed with Lord Myners that there was much left to do. "[We] are pleased with his promise that he will work tirelessly to ensure Solvency II is reformed to enhance the strength of the UK industry," he said.
Lord Myners said: "The government has a social duty to the pensioners and future pensioners of the UK, and the industry has a robust technical basis for its concerns. I am committed to furthering the technical argument here and in Europe . . . to ensure that our social obligations are met."
Concerns over annuity business
The Solvency II rules, due to come into force in 2012, are designed to create a common and risk-based approach to setting insurers' capital requirements across Europe. They will replace the current capital ratios applied to insurers regardless of the risk level of their business.
However, there are concerns that the proposals have become excessively conservative, as supervisors have reacted to the financial crisis. For UK life insurers, there is particular concern over annuity businesses, which provide incomes to pensioners. The rules demand that insurers use a rate to calculate the future costs of these promises that makes them look much more expensive than at present.
Lord Myners has joined the UK industry's campaign to allow them to use a different rate and so cut their liabilities.
Posts
