Hedge fund regulations, a tax on financial markets, a ban on naked short selling. The EU's bid to rein in the speculators has the financial industry up in arms. Lobbyists are already preparing to systematically attack the new proposals, Spiegel Online reported.
A day after the European Union outlined proposals to increase regulation of the financial markets, London's financial professionals are preparing a counter-attack. Some greeted the proposed regulations with contempt, others conjured up horror scenarios to campaign against the planned regulations.
"We are very disappointed by the proposals from Brussels," says Andrew Shrimpton, a partner at the leading London hedge fund consultancy Kinetic Partners. If the rules were really to be implemented then the sector would shrink massively, he says.
He was reacting to the announcement of several pieces of bad news for the financial industry this week. On Tuesday the German banking regulators BaFin announced that it was banning naked short-selling on government bonds issued by EU countries and naked credit default swaps. Chancellor Angela Merkel's ruling center-right government in Berlin said that it wanted to see a Europe-wide tax on financial markets introduced. And EU finance ministers, along with the Economic and Financial Committee of the European Parliament, voted for tougher regulation of hedge funds and private equity companies, despite objections from the British government.
The planned limits on hedge funds have provoked particular criticism in London, Europe's financial mecca. The industry there is particularly aggrieved as 80 percent of European hedge funds are based in Great Britain -- and many working in the City point out that Germany would not tolerate Brussels attempting to curb, for example, its automotive industry.
The financial industry is threatening Europe with possible consequences. Half of all hedge funds in Britain are branches of US companies, says Shrimpton. "It really is an Anglo-American industry." The US managers will now be thinking about whether it is worth maintaining a London office.
Ladwa also claims that financial institutions in Frankfurt and London could be in danger if the EU regulates unilaterally. "Switzerland is waiting with open arms," he says. The danger is real, he insists, adding that he knows people who have already moved their company offices.
It is unlikely there will be many companies moving this time either. What is likely is an even nastier trading of blows between the financial industry lobbyists and the EU. The two drafts by the European Parliament and the EU finance ministers on the regulations of the hedge funds are far from the final word. In the coming weeks, the two drafts must become one, and the British, via representatives in Brussels and finance industry lobbyists -- are going to try to overturn as many of the measures as they can. Read more.
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