EU finance ministers call for transparency on hedge funds[fr] 

EU finance ministers and central bank governors gathered at an informal meeting on 20-21 April 2007 in Berlin to discuss sustainable public finances, anti-VAT fraud measures and further action on hedge funds.

Finance ministers discussed an interim report by the Financial Stability Forum (FSF) on the issue of hedge funds and were generally positive about their impact on the efficiency and stability of markets.

The report finds that the number of hedge funds has grown more than twofold during the last five years to over 9,000, representing investments of around $1.6 trillion (roughly €1.180 trillion).

However, ministers recommended a voluntary commitment from the industry regarding risk management, transparency and good corporate governance, in order to ensure investor protection and encounter potential risks.

Ministers also discussed sustainable public finances and anti-VAT fraud measures and asked the Commission to draw up a study on the impact of the reverse-charge mechanism on the internal market. In order to better fight VAT fraud, the reverse-charge mechanism foresees tax debt for domestic transactions over a threshold of €5,000 to be shifted from the company providing the service to the recipient.

German Finance Minister Peer Steinbrück stated: "It would be a success to have an agreement and to have and agreed code of conduct with perhaps the 10-15% of the hedge fund industry which are responsible for a volume of 80-90%. You don’t need every hedge fund around the table but I think the most important hedge funds."

Luxemburg Prime Minister and Finance Minister Jean-Claude Juncker said that everyone in the EU "sometimes had mixed feelings" towards the hedge-fund issue.

Internal Market Commissioner Charlie McCreevy made clear that he was in favour of self-regulation for the hedge fund industry, arguing that there was "no market failure" to make further regulation on EU-level necessary.

McCreevy told reporters that hedge funds were "aggressive", but insisted that they were "big boys who know what they're doing".

Economic and Monetary Affairs Commissioner Joaquín Almunia said that hedge funds played a useful role in financial markets, but that there was a need to improve transparency to ensure investor protection.