EU Finance Ministers Agree to Keep an Eye on Hedge Funds
EU finance ministers meet Tuesday for talks that where they are expected to agree to keep an eye on hedge funds but set no new rules at this stage for the high-risk, high-return investments.
In a joint statement, they are set to warn creditors, investors and authorities to remain vigilant and do more to assess the potential risks that hedge funds could pose to the global financial system.
But the ministers have not endorsed more rules for funds -- even the voluntary code of conduct Germany has called for at talks it leads between EU nations and the G-7 group of developed countries.
German Finance Minister Peer Steinbrueck said on the way into the talks that he believed there was a good chance he could get agreement on a worldwide code of conduct by the end of the year.
The man who could draft EU rules to regulate hedge funds -- EU Financial Services chief Charlie McCreevy -- has said he sees no need to do so because the industry contains its own checks and balances and is so far working well.
Britain, the home of the European hedge fund industry, has also been cool on the German push to supervise the sector.
Hedge funds became a political hot potato in Germany in 2005 when a senior Social Democrat politician called for tougher controls, describing them as "locusts" after hedge fund pressure scotched Deutsche Boerse's bid for the London Stock Exchange and forced out the German stock exchange's chief executive.
The funds' aggressive behavior sent shock waves through German business, where shareholders usually hang on to their stakes for the long term and decisions are made slowly, in consultation with other groups.
The high-risk, largely unregulated and secretive investment pools have traditionally been the investment domain of the wealthy but have become popular with pension funds, life insurance companies and small investors looking for high returns -- even though some may not be prepared to deal with the risks.
The sudden collapse of U.S.-based hedge fund Amaranth Advisors last September after losing more than $6 billion (4.7 billion euros) on bad energy trades has spurred regulators on both sides of the Atlantic to look into the booming financial sector.
The finance ministers' talks come a day after the EU released sunny economic estimates that predict good growth, stable inflation and record-low jobless rates.
The European Commission raised its growth forecasts for the 13-nation euro currency zone to grow 2.6% this year as all 27 countries of the EU expand by 2.9%.
Ministers will also have a short debate on taxing cars and the environment. Steinbrueck said cars and trucks contribute to climate change and they would discuss whether tax incentives could reduce carbon dioxide emissions.