EU Set to Regulate Hedge Funds

I’ve written before about being in favour of a common EU-wide approach to financial regulation and crisis management. So, on the face of it, one might imagine that I’d be happy about the news that EU finance ministers are about to approve a proposal for EU-level regulation for Alternative Investment Fund Managers (AIFMs) including hedge funds and private equity firms. However, looking at the proposals, I’m not too positive about them.

I’m all in favour of registering these firms and collecting statistical information on the exposure that banks have to them. But EU the proposals seem to go well beyond this, including bans on selling to retail investors, limits on selling non-EU-domiciled funds inside the EU, the enforcement of capital requirements etc. I’m not sure that these proposals will ultimately do much other than encourage funds to set up outside the EU, for instance in Switzerland.

The documents associated with the proposal admit at various points that hedge funds did not cause the financial crisis. But other material says stuff like “the crisis has underlined the extent to which AIFM are vulnerable to a wide range of risks.” There seems to be an element here of trying to have it both ways. There is most likely also an element of being seen to do something by picking on an area that, as the BBC news story puts it “many say played a part in the global financial collapse” – even if what many say isn’t particularly accurate.

FT Magazine: How bankers brought Ireland to its knees

The cover story in this weekend’s FT magazine reviews the Irish banking crisis and features several current and former IE bloggers: you can read it here.

NYT Profile of Ben Bernanke

The New York Times carries a profile of Ben Bernanke: you can read it here.

Residential Property Investor Report

Here‘s an interesting report on the Irish residential property market prepared by Karl Deeter’s Irish Mortgage Brokers in association with PropertyWeek.ie & Frank Quinn (Senior College Dun Laoghaire). Its conclusion: “residential investment property is overvalued currently by an average of 37% in Dublin, 43% in Cork, and 39% in Galway.”

Bulgarian CO2 permits

The UN will suspend Bulgaria as of June 30 from trading emission permits under the Kyoto Protocol, and hence in the EU ETS. The reason is that its accounts are intransparent and untrustworthy. See here and here.

This is good news and bad.

The good news is that the problem seems to be incompetence rather than dishonesty. If organized crime had taken over Bulgaria permit accounts, I would expect that they would not be caught out by maternity leave.

The bad news is that the suspension is not immediate. In the EU ETS, permits trade under “seller beware” liability. That is, if an Irish company buys a dodgy permit from Bulgaria, that is Bulgaria’s problem. Bulgarian companies have thus been given six weeks to sell permits, knowing that their government will not be able to verify their accounts.