Sweden – don’t demonize hedge funds

By Reuters Staff
July 1, 2009

    STOCKHOLM (Reuters) – A minister for Sweden, which took over the EU presidency on Wednesday, said hedge funds and private equity firms needed regulation but should not be viewed as a primary cause of the global financial crisis.
   Speaking after a visit by the European Commission to Stockholm to mark the Nordic country’s start in the six-month presidency, Financial Markets Minister Mats Odell cautioned against “overzealous” regulation. 
   What was needed, he told Reuters, was well-considered, balanced regulation that helped avoid systemic risk.
   “I believe there is an exaggerated view in some countries that private equity and hedge funds helped pull us into the crisis,” Odell told Reuters. 
   “Our view is that these sectors must be regulated but I would point out that it’s important that it’s done in a way that lets them continue to play a role and contribute to the welfare of the European Union,” he said.
   Putting flesh on the bones of regulatory proposals is expected to be one of the top priorities for Sweden in the presidency.
   The European Commission put forward draft rules on bankers’ pay and hedge funds in April. The commission proposed that hedge fund managers must register and be subject to close scrutiny if they were to operate in the bloc. [ID:nLT495148]
   Hedge funds and private equity groups would have to report data to supervisors to ensure risks that could destabilise the financial system did not build up.
   “They have come with their proposal and now it is our part to find a consensus,” Odell said. “It is a major negotiation and one I look forward to.”
   He said he did not want to go into detail but that Sweden would act as a responsible EU president.
   The financial industry in Britain, home to Europe’s biggest market centre, has been lobbying against too much regulation from Brussels. But many commentators argue that if proposals are watered down too much, it would only fuel a future crisis.

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