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Transparency of institutional investors
Rapporteur: Klaus-Heiner Lehne (EPP-ED)
Consideration of working document
Juri Committee discussed a working document (currently only available in paper format) prepared by Mr Lehne (EPP-ED) on the transparency of institutional investors. Mr Lehne pointed out that it is a matter of fact that alternative investment vehicles such as hedge funds and private equity may give rise to systemic risk and to high levels of exposure of financial institutions, mostly banks.
He underlined that divergent national rules for the same investment products entail a risk of regulatory fragmentation in the internal market. “This might suggest a need for a Community level response”, he said.
The key to that problem would be as much transparency as possible, but as little regulation as necessary, he said.
This increased transparency would include disclosure vis-à-vis investors and supervisors, eg by a description of the investment strategies and details of the financial instruments in the portfolio.
Another way to increase transparency could be through the reporting requirements or the disclosure of ownership, particularly with regard to hedge funds. Finally, it might be useful to disclose the origin of money (money laundering), and to provide prime brokers with sufficient information from hedge funds for a better risk management.
Speaking for the Socialist Group, Miguel Garces(?) (PES/ES) supported the intention that it is necessary to introduce a common regulation on EU level. However, Codes of Conduct are not necessary.
Sharon Bowles (LIBE/UK) reminded to the ongoing reports in other committees, particularly on hedge funds. A common regulation, she said, is nice in theory, but the question is how to achieve this. Due to the heterogeneity of products this might be impossible to achieve. The only way could be a voluntary Code of Conduct, based on comply or explain approach.
Mr Medina (PES/ES) stressed the importance to review the capital requirements for banks in the EU. Also, sovereign wealth funds should be included.
Provisional timeline:
February: Workshop
March: Draft report
May: Discussion in Committee
June: Vote in Committee
July: Vote in Plenary