The finance ministers of the European Union reached an agreement to introduce more stringent control over hedge funds and private equity firms as part of a major effort to regulate financial markets.
Overriding objections from Britain, the finance ministers of the 27-bloc on Tuesday agreed that all hedge funds must get registered in EU member-nations to operate in the continent.
They should also make their activities more transparent by keeping open their investment strategies and the risks involved in such investments.
"We have reached a broad agreement on the general direction" of tightening the regulations on hedge funds and private equity firms, Spanish finance minister Elena Salgado said at the conclusion of a two-day meeting of the finance ministers in Brussels.
Salgado chaired the meeting in her capacity as the current president of the EU council of ministers.
The agreement will come into force only after the European Parliament in Strasbourg endorses it. The EU parliament on Tuesday passed a resolution calling for more stringent regulations on hedge funds and private equity firms.
Meanwhile, Germany went a step further by banning short-selling, in its effort to contain the fallout of the Eurozone crisis on the capital markets in general and the euro in particular.
However, instead of it helping markets, the move further unsettled the global markets on Wednesday. While the European bourses shed more than 1.5 per cent in their opening trade, Asia stocks were battered.
Under the present time-plan of the finance ministers, the EU parliament could debate the proposals by the finance ministers and pass a legislation in July after consulting the EU member-nations.
The finance ministers indicated that the crackdown on the hedge funds is the first step towards a comprehensive regulation of financial markets.
They are also working on plans to introduce a financial transaction levy to involve financial institutions in paying for the costs of future financial crisis.
Highly speculative business practices of the hedge funds have been cited as one of the main causes for the outbreak of the global financial crisis in 2008 and more recently they were criticised for aggravating the debt crisis in the Eurozone by speculating on the single currency-- the euro.
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