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Getbig Main Boards => Politics and Political Issues Board => Topic started by: SAMSON123 on March 11, 2010, 04:07:44 PM
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Geithner warns of rift over regulation
By Martin Arnold and Sam Jones in London and Nikki Tait in Brussels
Published: March 10 2010 20:50 | Last updated: March 10 2010 20:50
Tim Geithner, US Treasury secretary, has delivered a blunt warning to the European Commission that its plans to regulate the hedge fund and private equity industries could cause a transatlantic rift by discriminating against US groups.
A letter sent by Mr Geithner this month to Michel Barnier, Europe’s internal market commissioner, makes it clear that the European Union is heading for a clash with Washington if it pushes ahead with what the US – and Britain – fear could be a protectionist law.
The debate over the shape of future financial regulation has reached a critical point in Brussels. Diplomats were on Wednesday night moving closer to a compromise on the sweeping overhaul that has angered the industry and worried institutional investors.
The draft EU directive would impose tighter restrictions on hedge funds, private equity and other alternative investment funds. It has caused alarm in the City of London, where some in the industry say it is a thinly veiled attempt by France and Germany to undermine the UK’s dominance of financial services.
If European diplomats reach agreement at a meeting on Thursday, the directive will be put to EU finance ministers when they convene on Tuesday. The proposed rules will require approval by EU lawmakers.
Mr Geithner’s one-page letter, sent on March 1, stresses the need for the US and Europe to work together on regulation of the financial services industry.
He underlines last autumn’s commitment by the Group of 20 nations to avoid discriminatory measures in any regulatory response to the financial crisis.
Mr Geithner warns that US hedge funds, private equity groups and banks could be discriminated against if proposals to restrict the access of EU investors to funds based outside the 27-country bloc are included in the final law.
So-called “third country” elements of the directive would force non-EU funds to comply with the new rules if they wish to market themselves at all within the EU. The directive could also force EU-based private equity and hedge funds to use only locally based banks as custodians and depositaries.
Contentious areas also include rules on remuneration, limits on borrowing, the disclosure of sensitive information and the regime for depositaries.
Paul Myners, UK financial services minister, told a meeting of private equity executives on Wednesday that he would fight “line by line and minute by minute” to defend the free movement of capital. But he also warned that “nobody in this
room is going to get the directive they want”.
One senior private equity executive said the UK needed to take a stand before others would rally behind it.