Step forward for better regulation of financial markets
10 September 2008
The European Parliament’s Economic and Monetary Committee today passed a resolution calling on the European Commission to make legislative proposals covering “all relevant actors and financial market participants, including hedge funds and private equity”. The proposals include mandatory capital requirements, and reward packages to reflect losses as well as profits.
The resolution is a compromise between the Socialist Group in the European Parliament, the conservative EPP and the Liberals on a report by PES President Poul Nyrup Rasmussen.
Rasmussen said “Finally the door has been opened for regulation covering all financial actors including private equity and hedge funds. This marks the end of the regulation-free ride of private equity and hedge funds.”
“It could only be achieved with the agreement of all major political parties in the European Parliament. I am very satisfied that we have got everyone on-board with this compromise. It is a fair compromise and a first real step for better regulation.”
“For the Party of European Socialists and the Socialist Group in the European Parliament this represents the first big step to reduce the risk of further financial crises. But it is only a first step. The debate, and the fight for better regulation will not stop here.”
Among the proposals contained in the report are:
- “Capital requirements should be mandatory for all financial institutions”;
- “Reward packages should be aligned with longer term outcomes, reflecting losses as well as profits”;
- “Principles of disclosure to investors and to relevant public authorities” for “investment products, including alternative investment vehicles” to include “leverage/debt exposure”, “source and amount of funds raised”, “full transparency of high level executives and senior managers’ renumeration systems” and “registration and identification of shareholders beyond a certain proportion”;
- The rights of employees to be informed and consulted during takeovers should apply “whenever control of the undertaking is transferred by any investors, including private equity and hedge funds”;
- Measures to “avoid unreasonable asset stripping in target companies”;
- Action to avoid excessive debt to cover leverage for private equity so that “the level of leverage is sustainable both for the private equity fund/firm and for the target company”;
- Employees or staff representatives of pension funds be informed on how their pensions are invested and the associated risks.
The report is due to be voted on by the whole Parliament in October.
FOR MORE INFORMATION
Julian Scola, Communications Advisor - Media & Campaigns
Party of European Socialists, Rue du Trône, 98, B-1050 Brussels
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