The European Parliament has produced a report in which it argues for the necessity to modernise and improve the existing regulatory framework governing alternative investment vehicles such as hedge funds and private equity.
The European Parliament believes that whilst these highly leveraged investment vehicles have become increasingly important players in global financial markets their levels of transparency have not increased. The report notes that even before the current financial crisis emerged in August 2007 several global, EU and national institutions had presented reports about systemic risks, financial stability, excessive debt (leverage) and the valuation of illiquid and complex financial instruments.
In several reports the European Parliament has made recommendations on hedge funds and private equity to the European Commission, but with no response, culminating in a resolution of July 2007 in which the European Parliament expressed its regret that the Commission had not yet acted. With this subsequent report the European Parliament again sets out its view on the particular characteristics and risks associated with hedge funds and private equity and it proposes a legislative act to regulate matters such as capital requirements, originators and securitisation, the EU oversight of the credit rating agencies as well as transparency and excessive debt measures.
View Report with recommendations to the Commission on hedge funds and private equity, 17 September 2008