09 October 2008

McCreevy - Rasmussen and Lehne reports do not automatically herald new EU legislation

The Rasmussen and Lehne reports mark the opening of a new chapter in the EU level debate on private equity and hedge funds, Commissioner McCreevy said. If followed through, the Parliaments' recommendations would involve a significant change in the operating environment for private equity.

I emphasise that these reports do not automatically herald new EU legislation, McCreevy said. However, the reports command cross-party support and carry strong political weight, he continued.

The concerns relating to private equity stem from the perceived impact of this business on the social economy – in particular, implications for stakeholders in buy-out companies, McCreevy said. “I am also in agreement with the report's call for obligations on information and consultation of workers.” McCreevy also welcomed the issues on compensation schemes. Also, in the banking industry the remuneration structures need to be much more closely aligned to long-term rather than short-term performance, he said.

However, the question on leverage is best addressed with the capital requirements framework, he said. “It would take some persuading to convince me that we should legislate for leverage ceilings per se on private equity companies”, McCreevy said. The risk characteristics of every private equity business are different, he underlined.

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