28 April 2010

Sobel: US and EU fully agree on tough and rigorous oversight regime for AIFMs

Sobel warned that there is no doubt about the establishment of such an oversight regime. However, this needs to be aligned with the principles of non-discrimination and a level playing field. He also reiterated the need for a comprehensive regulation of OTC derivatives markets.

Speaking in Brussels about the transatlantic cooperation and financial regulatory reform, US Treasury Deputy Assistant Secretary Mark Sobel outlined the current initiatives on the overhaul of the financial system. The United States is committed to pursuing financial reform on a multilateral, as well as domestic basis, he said.

 

The To-Big-To-Fail issue requires a comprehensive set of reforms, he said.  To constrain risk taking, capital, liquidity, and other prudential standards have to be strengthened. Also, disclosure, transparency and market discipline have to be increased.

 

Stronger shock absorbers need to be built across financial markets and infrastructure which includes a comprehensive regulation of OTC derivatives markets: It also includes the registration requirement of advisers to hedge funds and other private pools of capital above a de minimus threshold.

 

Finally, tools to manage the failure of a major firm without exposing taxpayers to losses have to be developed. This includes a robust resolution authority to unwind and break up major failing financial firms.

 

Sobel reminded to the Pittsburgh Summit which called for developing by end-2010 internationally-agreed upon rules to improve both the quantity and quality of bank capital, to strengthen liquidity risk standards and to discourage excessive leverage. He also touched upon a variety of other issues currently under discussion, including the introduction of a levy for the banking sector.

 

Touching upon accounting standards, Sobel noted that “there are undoubtedly different views internationally regarding the roles that investor transparency and financial stability should play”, pointing in particular on the issue of fair value accounting. The challenges ahead are considerable, he noted.

 

Sobel ended with a warning to the hedge funds and alternative investments sector. “Let there be no doubt”, he said. “The United States and EU fully agree that AIFMs must be subjected to a tough and rigorous oversight regime and we are both putting such regimes in place.” However, he also underlined that these measures need to be aligned to the principles of non-discrimination and a level playing field.

 

Full speech

© US Treasury