By James Kanter
(C) The New York Times 2010
BRUSSELS — European Union finance ministers approved a draft law on Tuesday, May 18, that would make it harder for foreign hedge fund managers to do business in the trading bloc and that could threaten London’s preeminence as a financial center.
But in a diplomatic concession to Britain — and to its newly appointed chancellor of the Exchequer, George Osborne — the ministers issued a statement “taking into account the concerns” of London.
Osborne now is likely to turn to Michel Barnier, a French commissioner for financial services, and to the European Parliament to try to ensure that the final results mostly reflect London’s wish that foreign hedge fund managers be able to continue doing business across the 27-member bloc without too many impediments.
Those rules have been the subject of a fierce lobbying battle over the last eight months by British officials who fear that the rules will erode the position of the City of London as a global financial hub while doing little to protect the financial system.
Criticism also has come from the United States, where Treasury Secretary Timothy Geithner has warned that the measures could be discriminatory.
Regulators and lawmakers worldwide are tightening their scrutiny of hedge funds and private equity firms on the grounds that they may have been partly to blame for the worst financial crisis in a generation. Many in Europe also see the hedge fund and private equity industries as too opaque and secretive.
That has raised a serious challenge to London, which is the headquarters for the managers of many non-European Union funds and where about 70 percent of hedge funds in Europe are based.
The Czech Republic also is skeptical about the legislation.
Britain already won a reprieve in March, when European Union finance ministers delayed a decision on new rules for hedge funds that are part of draft legislation called the Alternative Investment Fund Managers Directive.