BdB: Making hedge funds more transparent

15 May 2007

The Association of German Banks issued a position paper on hedge funds supporting the recent calls for more transparency. The BdB notes that that the possible systemic risks which may arise from hedge funds, with their potential threat to international financial stability, represent the main challenge for international policymakers.

“A prerequisite for ensuring sustained financial stability is adequate transparency about the level and allocation of financial risk”, the report notes. “The rising proportion of business volume generated by market participants that are subject to no, or only limited, regulation is making this transparency increasingly difficult to achieve”.

Since a solution of this kind requires highly complex political co-ordination, preference should be given in the short term to various types of qualitative self-regulation. A threepillar model is proposed comprising a code of conduct, a rating system and regular dialogue both among regulators and between regulators and hedge funds.

Position paper

© BDB - Bundesverband Deutscher Banken