The European Union’s internal markets commissioner, Charlie McCreevy, has warned the European Parliament not to “tar hedge funds and private equity with the same brush” as regulated financial services firms.
In response to two reports which propose increased private equity and hedge fund regulation across Europe, McCreevy also said private equity was not the cause of current market conditions and that it would play an important part in promoting the region’s economic recovery.
Without sovereign wealth funds, private equity and the like, Europe's recovery from today's turmoil will be all the slower.
“It has turned out that it was the regulated sector that had been allowed to run amok with little understood securitisation vehicles,” McCreevy said in a speech to a European Parliament plenary session. “Let me be clear the EU economy is going to need massive investment in the time ahead; without sovereign wealth funds; private equity and the like, Europe's recovery from today's turmoil will be all the slower.”
The reports to which he was responding, recognise that private equity and hedge funds “provide liquidity, foster market diversification and market efficiency” in Europe, but call for, among other things, the asset classes to be subject to minimum capital requirements, to provide greater transparency and to “inform and consult” a company’s employees when its ownership changes hands.
The parliament voted through the proposals on Tuesday, which will now be sent to the European Commission. The EC will respond to the reports, potentially with draft legislation, by the end of 2008.
The European Venture Capital Association welcomed the speech from the internal markets commissioner, as it reiterated the importance of considering what regulation is already in place within individual EU countries before implementing new frameworks.
“Any regulation of this sector should be proposed in the context of cost and benefit,” said EVCA secretary-general Javier Echarri.
A spokesman for the EVCA told PEO that the industry will continue to engage with the policymakers and avoid complacency.
As internal markets commissioner, Charlie McCreevy’s role is to promote the interests of the European single market. On his website, he describes his responsibility to ensure that “fragmentation and administrative burdens are reduced”.