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Votes on hedge funds and supervision in Parliament
The last fortnight has seen the European Parliament’s ECON committee, on which I sit, vote on two very important and high profile pieces of legislation to reform Europe’s financial services industry.
Last week MEPs voted in favour of ambitious reforms of the supervisory framework under which cross-border banks, insurers and fund managers operate in Europe. This included a vote on the establishment of a European insurance and pensions authority (known as EIOPA), for which I am the Parliament’s lead negotiator.
Members of ECON voted to give significant powers and responsibilities to EIOPA, more than I had recommended on the basis of my experience of the insurance industry. Nonetheless I support the Parliament’s ambition to ensure that real change to how we regulate financial services occurs following the financial crisis, and I am now in negotiations with representatives of national governments and the European Commission arguing this point.
Earlier this week MEPs voted on the highly controversial AIFM Directive to regulate hedge funds and private equity. All parties involved agreed that these important parts of the financial system need regulation. However, the poor drafting of the initial proposal and subsequent efforts from some quarters to impose additional measures restricting access to non-European funds or investors led to wide spread criticism of the legislation, particularly from the UK, which is home to the vast majority of such ‘alternative’ funds.
Despite my support for many aspects of the legislation, I was one such critic, particularly of the third country restrictions. I think these restrictions not only amount to a form of protectionism by Europe, but will also reduce investment options for our pension funds, which is ultimately negative for European citizens. As a result I voted in favour of a number of alternative amendments that better reflected my view, and abstained overall on support for the legislation.
As with the supervisory legislation mentioned above, negotiations on the AIFM Directive will now start between Parliament, national governments and the European Commission with the aim of beginning the introduction of the legislation in 2011.
Dear Mr Skinner,
I would be grateful if you could let me know where this got to before the summer break, and the expected timescale for the next session.
Regards
Hugo Watson Brown
Kent
Dear Hugo
Both AIFMD and the supervision package made significant progress following the ECON votes referred to in the story above. In both cases negotiations between the Parliament, Council and Commission (known as trialogues) have been very tough, with both sides bargaining hard to ensure that the final legislation is in a form near enough to the objectives defined by the Member States (in the case of the Council) and Parliament (as defined by the proposals voted on in the Parliament’s ECON committee).
While I am not directly involved in the negotiations around AIFMD I understand that there is agreement on a deal on the majority of the key points, but ongoing disagreement on the extent to which non-EU fiunds and fund-managers can market their services across the EU (ie, should they have to seek permission to market in each Member State, or can they qualify for an EU ‘passport’ if they meet certain stringent requirements?). I recently read in the press that a compromise could have been struck on this point in one of the final trialogues before the summer recess, but again this is only second-hand information.
On the supervision package, which as a rapporteur I am directly involved in, I can say with confidence that we are close to striking a deal. A few key elements remain to be agreed upon, chiefly around the role of the new supervisory authorities in taking decisions addressed to individual firms in very specific and necessary circumstances, but ground has been conceded on both sides and I would hope for an agreement in September to enable to new supervisory framework to be up and running by the start of next year. It is imperative that we get the new framework in place as soon as possible in order to increase the safety and effectiveness of the single market in financial services, therefore I hope my optimism is not mis-placed.
Keep checking this website for updates on progress. And thanks for your interest.
Peter
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