Hedge funds in EU will be regulated - Almunia

BRUSSELS, Dec 3 (Reuters) - Hedge funds in the European Union will be regulated following a public consultation that is currently underway, a senior EU official said on Wednesday.

"On hedge funds, we have used as our basis that they must be regulated," EU Economic and Monetary Affairs Commissioner, Joaquin Almunia told the European Parliament.

On Monday the bloc's internal market commissioner, Charlie McCreevy, launched a public consultation on whether hedge funds needed more oversight but stopped short of saying if there will be regulation or a softer approach, such as an industry code.

The results of the consultation will be made known early next year but the EU assembly already said in a report backed by a large majority the sector needed regulating.

"Two years ago we had the last consultation on hedge funds," the report's author, Danish socialist lawmaker, Poul Nyrup Rassmussen, said.

Critics have blamed short-selling strategies of some hedge funds for exacerbating market turmoil.

"We don't need more consultation. We need regulation. We know exactly what are the problems," the ex-Danish prime minister added.

The EU assembly has joint say with the bloc's 27 members on all financial services legislation.

Hedge funds are largely based outside the EU but their managers -- most of which in the EU are based in London -- are directly supervised as are the funds' prime brokers, the banks.

McCreevy has said in the past no new regulation is needed for hedge funds and that they played no major role in the worst financial crisis in 80 years.

(Reporting by Huw Jones, editing by Elaine Hardcastle)