Hedge funds face first global risk check

LONDON (Reuters) - Regulators will take their first global snapshot of risks posed by hedge funds in September as part of wider efforts to police the sector more closely, a top regulatory official said on Tuesday.

The International Organisation of Securities Commissions' members will require hedge funds operating on their turf to provide 11 sets of data at the end of September.

IOSCO published plans for its data "template" in February, listing the data funds and their managers will have to provide, such as the value of their long and short positions in different assets and their borrowing levels.

"The next step for us is going to be is coordinating a survey of hedge funds using this template so we can try to get a global picture for the first time on the state of the hedge funds industry and then analyse that data from a systemic perspective," IOSCO Secretary General Greg Tanzer told the Reuters Regulation Summit.

Hedge funds were accused of aggravating market volatility during the worst of the financial crisis by short selling stocks and other practices, sparking the introduction of curbs in many countries on short selling.

Policymakers say the sector is too opaque and not regulated enough though many regulators agree the sector was not a fundamental cause of the crisis and no fund needed a public bailout like many banks.

The G20 group of leading countries agreed last year that hedge funds should be made to register, be supervised directly and submit data regularly to the authorities.

The hope is to learn from the crisis so that excessive risks building up in the financial system are spotted early enough for regulators, central banks and governments to take speedy action.

"We can consider what systemic risk that information might throw light on, not necessarily in what hedge funds are doing but might be things that hedge funds hold," Tanzer said.

"Or it might be that substantial investors in the market might be throwing up issues around asset price bubbles or methods of trading that might be driving asset values in a particular direction," Tanzer added.

The snapshot will be done by national authorities that are members of IOSCO, such as the Securities and Exchange Commission in the United States and the Financial Services Authority in Britain, two watchdogs that oversee the bulk of the world's hedge fund managers.

The FSA has already said hedge funds don't pose a major risk.

"It will be quite a full set of data that comes back. We will consider how often we want to carry it out and what to do with the template next," Tanzer said.

"Our expectation is that in doing this survey for the first time it will probably throw up some interesting information that we will need to analyse which may indeed lead to some sort of refreshing of the template itself," Tanzer added.

(Reporting by Huw Jones, editing by Stephen Nisbet)