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EU nations reach deal on tighter hedge fund rules

19 October 2010 20:21 (UTC +04:00)

Baku-APA. European finance ministers on Tuesday reached a deal on tighter regulation of hedge funds, the latest step in the European Union’s effort to increase the stability of its financial system in the wake of the credit crisis, APA reports quoting news.yahoo.com website.
The deal, for the first time, puts hedge funds and other private investment vehicles under European supervision. It sets out tough requirements for risk management as well as minimal capital and liquidity cushions.
"It’s in fact a new regulation for a new sector," said EU internal markets chief Michel Barnier.
Hedge funds promise outsize returns to rich or institutional investors and often pursue complex trading strategies that can involve large amounts of leverage, or debt.
These funds "on certain days are responsible for half of all transactions on European markets," Barnier said.
The deal also introduces a so-called "passport," under which funds that are approved in one country will have access to investors in other EU countries.
The passport will be valid for European funds as of 2013 under the current timetable and for non-EU-based funds as of 2015.