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In a meeting of EU leaders in Berlin this past weekend, major proposals were agreed to increase regulation of financial markets including hedge funds and to eliminate tax havens.
Yesterday the heads of government and finance ministers of Germany, France, UK, Netherlands, the Czech Republic and Luxembourg, together with central bankers and European Commission President José Manuel Barroso met to plan the creation of a comprehensive regulatory framework covering all financial markets, their products and participants and including hedge funds and any other private pools of capital.
Details have not yet been finalised or released and the final accord needs to be agreed by all EU countries, but the changes are expected to be drastic. Capital requirements of financial institutions are expected to be raised with capital being set aside in good years to cover downturns, hedge funds are expected to be brought completely under the banking regulatory process, and it appears that the EU will attempt to close down all tax havens including those outside of its jurisdiction by imposing sanctions.
The German Chancellor, Angela Merkel, said the EU would not tolerate financial speculation and the uncontrolled use of leverage. She said "We have today underscored our conviction that all financial markets, products and participants must be subject to appropriate oversight or regulation, without exception and regardless of their country of domicile. This is especially true for those private pools of capital, including hedge funds, that may present a systemic risk".
The EU leaders’ meeting is designed to present a common position in advance of April’s G20 summit. The proposals are expected to go beyond the softer rule-based regulatory changes supported by the UK and anticipate a crack-down on all forms of global finance.
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