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James Modrall, a partner at Cleary Gottlieb Steen & Hamilton, said: “People should be aware that the Directive has been amended to apply to alternative investment groups provided that they have an investment in two different areas of financial services, insurance and banking for example”.
One fund manager said that the new rules “would certainly affect how we approach financial services investment, and for niche financial services investors the amendments are going to make supplemental layers of regulation impossible to avoid”. The Directive was developed by the European Commission in 2002 to try to reduce systemic risk in the European financial services sector by ensuring financial conglomerates have sufficient capital to meet their liabilities.
The Directive has been subject to extensive amendments over the past three years as a result of the financial crisis, with fewer exemptions granted to smaller firms and tighter risk profiles adopted. The proposals to extend the Directive to cover private equity investment in financial services were put forward this summer, with further consultation expected next year, according to a person with knowledge of the situation.
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