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EU ministers clinch hedge funds deal

Tuesday 19 October 2010 - by Will Henley

European finance ministers have unanimously agreed a deal to regulate the operations of international hedge funds in the EU following several months of protracted negotiations.

A draft directive allowing hedge funds or alternative investment fund managers to “passport in” services and market their funds throughout the single market is now set to be presented to the European Parliament.

The directive, hammered out on Tuesday despite long-standing disagreements between France and the United Kingdom, establishes a “harmonised framework” for monitoring and supervising the risks that these funds pose to investors, counterparties and overall financial stability.

In a statement, finance ministers meeting in Luxembourg under the aegis of the Ecofin Council, said: “It is intended to fulfil commitments made by the EU at the G20, as well as the European Council's pledge to regulate all market operators whose activities might pose a risk to financial stability.”

Under the "passport" deal, hedge funds approved in one EU jurisdiction will have freedom to operate in other territories without needing to seek separate regulatory approval.


Speaking to reporters following the announcement, Belgian finance minister Didier Reynders, who chaired the talks, said: "We have reached an agreement with unanimity."

Talks with senior officials last week collapsed without agreement.

The United Kingdom, which is home to the lion's share of European hedge funds - around 450 in total, had been reported to be lobbying against the draft directive.

France, which was understood to want to block the passport system, was on Tuesday reported to describe Tuesday's agreement as a "compromise".

In their statement, the ministers added that they hoped the agreement would be uncontroversial enough that it could be adopted by the Parliament at first reading.

They said: “The Council hopes to be able to conclude the negotiations in the near future, on the basis of the agreement reached today.”


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