The Impact of EU Plans to Regulate Hedge Funds and Private Equity Firms
The EU reviewed the role of hedge funds and private equity in the financial crisis and drew some lessons regarding the need for EU level regulation of these fund types.
The financial crisis had revealed that hedge funds could impact financial stability in ways that had not previously been expected.
However, there is also widespread concern about the extent to which private equity portfolio companies are over-reliant on increasingly scarce bank debt, raising questions about their financial viability.
So there are those who say private equity did not cause the economic crisis which we are now experiencing, but we can all agree that the crisis most definitely is the result of excessive debt, and hedge funds and private equity are responsible for a very sizeable amount of recent debt.
There are growing concerns with the EU's plan to put forward new regulations within the hedge fund industry as the changes could prove extensively costly to implement, even with the new rules being toned down by the member states.
In the current state of the new regulations a group of city lawyers said that the changes could lead to a systematic failure within the European markets if they were to be carried out.
They could also create significant legal uncertainty, which would lead again to a potential systemic failure and widespread market disruption, unless they are appropriately amended.
Due to the possible chaotic effects that these new regulations could cause to the European economy, ministers are expected to intensify their lobbying efforts to head off what are widely seen as heavy-handed rules governing the behaviour of hedge funds, private equity firms and other alternative investment businesses.
The City minister recently held talks with the Spanish government, which currently holds the EU presidency about his concern with hedge funds and private equity firms, of which many are based in London, will just simply relocate from the EU if the rules are implemented without reforms.
The financial crisis had revealed that hedge funds could impact financial stability in ways that had not previously been expected.
However, there is also widespread concern about the extent to which private equity portfolio companies are over-reliant on increasingly scarce bank debt, raising questions about their financial viability.
So there are those who say private equity did not cause the economic crisis which we are now experiencing, but we can all agree that the crisis most definitely is the result of excessive debt, and hedge funds and private equity are responsible for a very sizeable amount of recent debt.
There are growing concerns with the EU's plan to put forward new regulations within the hedge fund industry as the changes could prove extensively costly to implement, even with the new rules being toned down by the member states.
In the current state of the new regulations a group of city lawyers said that the changes could lead to a systematic failure within the European markets if they were to be carried out.
They could also create significant legal uncertainty, which would lead again to a potential systemic failure and widespread market disruption, unless they are appropriately amended.
Due to the possible chaotic effects that these new regulations could cause to the European economy, ministers are expected to intensify their lobbying efforts to head off what are widely seen as heavy-handed rules governing the behaviour of hedge funds, private equity firms and other alternative investment businesses.
The City minister recently held talks with the Spanish government, which currently holds the EU presidency about his concern with hedge funds and private equity firms, of which many are based in London, will just simply relocate from the EU if the rules are implemented without reforms.