EU finance ministers agree on tough regulation on hedge funds

10:36, May 19, 2010      

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EU's Commissioner for Economic and Monetary Affairs Olli Rehn, EU rotating presidency Spanish Finance Minister Elena Salgado and EU's Commissioner for Internal Market and Services Michel Barnier (L to R) attend a press conference after EU''s financial ministers' meeting in Brussels, capital of Belgium, 18 may 2010. (Xinhua/Wu Wei)

European Union (EU) finance ministers on Tuesday agreed on tough regulation on hedge funds despite differences among the 27 member states of the bloc.

After a roundtable debate, the finance ministers concluded a general approach on regulating alternative investment fund managers (AIFM), which will also be on the agenda of the G20 summit to be held in Canada in June to find a way of overseeing and supervising such funds.

A statement released after the meeting said that the draft directive was aimed at "establishing a harmonized framework" for monitoring and supervising the risks that alternative investment funds pose.

In the statement, the finance ministers called for a strict supervision on the fund managers and sought new regulation of the hedge funds which are not registered within the EU.

As to the hedge funds based within the EU, the ministers said that approval from one member state will enable them to trade throughout the EU, while the funds based outside the EU will need to seek permission from member states separately.

Britain has been reluctant to tighten rules concerning hedge funds, especially concerning those based outside the EU, fearing that will hurt its status as an important financial center. Britain now is home to 80 percent of the hedge funds operating in Europe.

"I should make it clear that we are not regulating the funds, we are regulating the fund managers," Spanish Finance Minister Elena Salgado told a press conference after the meeting.

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