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Financial Market Stability
Ministers and central bank governors exchanged their views on the current state of financial markets. It became clear from their contributions to the debate that the current situation is favourable. The dominant view was that positive forecasts for developments in the real economy are reflected in financial market trends.
Participants did not view temporary turmoil on the financial markets as corrections meriting cause for concern. Potentially heightened sensitivity among investors was not deemed to be negative either. It was agreed that vigilance remains advisable given the continuing risks associated with global imbalances and the potential problems caused by new, complex financial market instruments.
Hedge Funds
Ministers and central bank governors discussed the role of hedge funds in financial markets. Participants agreed that this form of investment generally has a positive impact on the efficiency and stability of financial markets and provides a valuable contribution to the functioning of the markets as a consequence.
At the same time, it was also emphasised that in view of investor protection and potential systemic and operational risks, a voluntary commitment from the hedge fund industry itself regarding risk management, appropriate transparency and good corporate governance, could provide a desirable contribution to reinforcing market discipline and an expansion of an indirect regulatory approach as a consequence. It was agreed that the topic would be revisited as early as the next ECOFIN meeting on 8 May 2007.
Precautions to Secure Financial Market Stability
Following up on the previous Informal held in Helsinki in September 2006, the participants were informed about ongoing work to discuss possible precautions to deal with a theoretical trans-national financial market crisis.
Participants agreed that growing financial market integration created new challenges for national and European actors and that clear rules were important. Work on this matter will be continued. The Ministers and central bank governors agreed to debate the recommendations resulting from this work under the Portuguese presidency in the second half of 2007.
ECOFIN results
Agenda
Commission press release