BRUSSELS, Nov 6 (Reuters) - European Union plans to tighten regulation of hedge funds and private equity managers could choke off investments and deepen the credit crunch, British Business Secretary Peter Mandelson said in the text of a speech to be delivered on Friday.
The executive European Commission has put forward a draft law that requires managers of alternative investment funds to register and disclose more information to regulators if they want to operate in the 27-nation bloc.
The move followed accusations by some policymakers that hedge funds amplified the crisis by short-selling bank stocks. EU governments and the European Parliament will have the final say on the draft.
Britain, the EU’s top hedge fund and private equity centre, has criticised the draft legislation for being protectionist and its “one size fits all” approach. France, Spain and Germany back strong regulation of the sector. “It is vital that this (directive) is fully consulted on and carefully designed,” Mandelson said in the text of the speech, to be delivered at an industrial conference in Brussels.
“We have to make sure that we don’t cut off important sources of venture capital or do anything that makes it harder to manage venture capital investments within the single market,” he said.
Mandelson said the draft law could choke the flow of capital to projects aimed at boosting growth and creating jobs and put European companies at a disadvantage to U.S. firms.
“What we can’t afford is to trade an acute credit crunch for a chronic one,” he said.
“Even before the credit crunch we just weren’t getting enough venture capital to innovative and high tech companies. Even in this environment, U.S. firms could tap venture capital markets worth over $5 billion this year. In the EU it was about a tenth of that.”
He urged the Commission to set up an EU-level fund to pool capital and risk across the region to back high-tech funds. The draft law is expected to come into force, probably around 2015. (Reporting by Foo Yun Chee; Editing by Steve Orlofsky)
Our Standards: The Thomson Reuters Trust Principles.