Britain is making progress in revising tough EU plans to regulate private equity and hedge funds, the City Minister said on a lobbying visit to Brussels today.
Lord Myners claimed that Britain’s view, that proposed limits on leverage were based on a “flawed understanding” of the way alternative investment managers operate, were gaining traction around the EU.
The minister spoke after the Swedish Government, which holds the rotating EU presidency, published proposals to amend a draft EU directive to regulate hedge funds drawn up by the European Commission in the aftermath of the economic crisis.
Sweden calls for changes in the calculations of leverage and in the definitions of funds covered, to answer criticism that the draft directive is one-size-fits-all.
Lord Myners, whose visit followed that of Boris Johnson, the London Mayor, last week, on a similar mission, said that hedge funds were still being set up in London, which he claimed was proof of their faith in the City.
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“As many new hedge funds have been established in the UK in the last year as have moved to other locations,” said Lord Myners during a visit to the European Parliament.
“There is clearly a risk for Europe that a misguided directive would see these funds and their managers going to non-European locations such as Switzerland and the Far East. But as yet there is little evidence that that is gaining any real momentum and I think that is in part recognition that the Government is making good progress in engaging with Brussels.”
Lord Myners has targeted several key areas of the directive, which he believes would alienate fund managers and put jobs at risk, including limits on borrowing, restrictions on the use of funds based in third countries and disclosure of business plans which could damage competitiveness.
“In the UK in particular, the major institutions, pension funds and charities have been investing in third country funds for a long time without any misadventure and there is no evidential reason why they should be restricted from doing that in future,” he said.
He argued that neither private equity nor hedge funds played a fundamental role in the global financial collapse and instead pinned the blame on bankers. “In my view the problem was less with hedge funds and more with the people who were lending to the hedge funds.”
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Lord Myners also insisted that the Government would reap rewards from its massive injections of cash to prop up RBS and Lloyds. “I continue to remain confident that there are very good grounds for believing that the UK Government’s support for the banking system within the credit guarantee system will prove to be profitable.”
Britain will face opposition from Socialist MEPs when the directive moves into the European Parliament for debate later this year. When Mr Johnson made his visit, Poul Nyrup Rasmussen, the former Danish prime minister who is now leader of the Party of European Socialists, said that the proposed reforms were long overdue and encompassed the bare minimum required.
“The City of London should be very satisfied they have escaped so lightly,” he warned.