A new framework for private equity and hedge funds - Better and transparent financial markets
7 May 2008
PES President Poul Nyrup Rasmussen presented his proposals for the better regulation of private equity and hedge funds to the European Parliament's Economic and Monetary Committee.
The Rasmussen Report proposes a comprehensive set of measures to promote greater financial stability, ensure more transparency, prevent conflicts of interest, and reduce excessive debt. Instead of 27 different sets of national rules Rasmussen proposes one single European framework that would boost the financial market, jobs and economic growth.
"Long before the financial crisis we were warned about the systemic risks and excessive debt of hedge and private equity funds" said Poul Nyrup Rasmussen. "Today's financial crisis was not caused by hedge and private equity funds - but the crisis revealed the huge interdependence of all the players in the financial market and showed the high vulnerability of companies with heavy debts due to leveraged buy outs."
His far-reaching proposals include:- A 'single entry point' into a single European financial market with a European Union framework for transparency, registration and authorization for managers of hedge and private equity funds;- Reducing the danger of extreme risk taking and excessive debt by introducing new 'capital requirements' - like those that already apply to mutual funds , banks and insurance companies; - Ensuring the viability of our private companies through protection against capital depletion; - A European Union Public Credit Agency - an independent, conflict-of-interest free credit rating agency to introduce much-needed competition into the credit rating industry;- A public register for complex, structured credit products;- A European Financial Supervisor covering all financial sectors to increase cooperation between national supervisory bodies and oversee cross-border and European-wide activities.
"There is now an unstoppable demand for greater transparency and better regulation of the financial markets" explained Poul Nyrup Rasmussen. "For the sake of our pensions, our jobs, our savings and our welfare states the sooner we take action the better. The European single market was never created by the market itself but through political decisions. My proposal is to open the door to a single European financial market in exchange for a better regulatory framework. I believe it is a very fair offer."
The European Parliament is leading the way in proposing measures to improve the regulation of private equity and hedge funds.
The Party of European Socialists, bringing together all European socialist and social democratic parties, adopted a resolution on private equity and hedge funds at its Council meeting in Sofia last year in a debate involving the Chair of the US House Committee on Financial Services Barney Frank, Austrian Chancellor Alfred Gusenbauer, Bulgarian Deputy Finance Minister Gyorgi Kadiev, former Irish finance Minister Ruairi Quinn, Chair of the European Parliament's Economic and Monetary Affairs Committee Pervenche Béres, plus MEPs Mia De Vits and Stavros Lambrinidis.
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