British opposition halts draft EU rules to curb hedge funds
IRELAND'S hedge fund industry breathed a sigh of relief yesterday after draft EU rules were put on ice following opposition from Britain and fears of a trade war with the US.
Spain, which holds the bloc's rotating presidency, dropped the draft law from the agenda until Britain, which is home to 70pc of Europe's hedge funds, agrees to changes.
The draft had been intended to curb pay and borrowing at hedge funds and usher in an era of transparency for a secretive industry that many politicians said exacerbated borrowing difficulties in Greece.
The Spanish wanted to hammer out a compromise this month, but British chancellor Alistair Darling scuppered a deal over a controversial clause on the treatment of foreign funds and managers. Britain wants foreign hedge fund managers and funds to get the same access to European investors as those based in the EU.
The draft rules would require hedge funds, private equity groups and others to register and disclose trading information to supervisors.
The talks' collapse gives Spain another two months to break a deadlock between Britain in one corner and France and Germany in the other.
The main bone of contention is a suggestion by France and Germany for an EU 'passport' to give European funds and managers free rein to tap investors across the bloc without having to re-register in each of the 27 member states. Foreign-registered funds and managers would be denied the passport under the current compromise.
"We could not sign up to something that we regarded as excluding properly supervised firms operating out of London," Mr Darling said last night.
Ireland has also voiced problems with the draft which is based on a text penned by then-internal market commissioner Charlie McCreevy last April. Many Irish banks act as custodians or administrators for funds and managers based in other financial centres and the banks could be left liable if incorrect values are placed on assets under their custody.
The Irish Funds Industry Association estimates around 6,000 funds worth €689bn are administered in Ireland.