Europe??s controversial plans to regulate hedge and private equity funds were dealt a fresh blow on Thursday when the European Central Bank warned the proposals would put the industry at a significant competitive disadvantage.
The ECB said it supported ??the intention to provide a harmonised regulatory and supervisory framework? for alternative investment fund managers in the European Union. But it urged the Commission ??to continue the dialogue with its international partners, in particular the US, to ensure a globally coherent regulatory and supervisory framework?.
In a legal opinion published on its website, the ECB warned that funds could simply shop around to find a country where the policing of the sector was less stringent. ??An internationally co-ordinated response is necessary given the highly international nature of the industry and the consequent risks of regulatory arbitrage and evasion,? it said.
It also warned that some of the provisions of the proposed legislation ?? for instance on so-called ??short selling? ?? could unfairly penalise hedge and private equity funds unless they were applied across the financial services sector.
The opposition voiced by the Frankfurt-based ECB,is likely to be seized upon by the alternative investment fund sector ?? and influence the extensive re-writing of the proposals that is already under way.
