Hedge funds escape tighter regulation
House Financial Services Committee agrees hedge funds do not add more risk or leverage to the financial system
WASHINGTON, DC - Hedge fund managers and private equity investors are breathing a sigh of relief after US lawmakers have indicated tough new financial rules will not apply to them.
The US House of Representatives is set to pass a bill that severely constrains activity in banking and mortgage lending, while letting hedge funds and private equity firms carry on as normal, following last year's collapse of credit and financial markets.
Barney Frank, chairman of the House Financial Services Committee, said: "How can you regulate a hedge fund like a mortgage? It doesn't make any sense. It will need to be a form appropriate to them."
The proposals are a victory for the main industry organisations representing hedge funds and private equity firms, who are still battling proposed strict new rules in Europe and spent $3.6 million on lobbying Committee members during the first six months of this year.
"I spent a lot of days hearing, 'we had nothing to do with the crash'," said Republican committee member Jim Hines, a former investment banker. "For the most part, they're right. Part of what we need to do is not hurt those who don't add more risk to the system."
Fellow Republicans on the panel, such as Spencer Bachus, agreed: "A hedge fund that fails just means they made the wrong bet. Hedge funds are not overleveraged."
Other panel members said they expect the final legislation to include requirements for registration and reporting to the US Securities and Exchange Commission. That would track proposals in the Senate and in President Barack Obama's proposed rules for private equity and hedge funds.
Obama's plan would require hedge funds and private equity funds to register with the SEC and disclose information about their holdings. If firms are judged to pose a danger to the financial system, they could come under the purview of a proposed risk-monitoring regulator.
Richard Baker, president of the Washington-based Managed Funds Association, said to Bloomberg: "While not the root cause of these concerns, as financial market participants, we have a shared interest in working to promote financial market and economic stability, and the restoration of investor confidence."
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Modernising compliance functions with regtech
Regtech addresses the complexities of regulatory requirements, offering innovative tools to modernise compliance functions, streamline processes and enhance efficiency. This article explores its role in compliance and reporting within the banking sector,…
For the Fed discount window, destigmatisation starts at home
US supervisors must change tack to encourage central bank liquidity utilisation
Study finds just 10 banks plan to apply for FRTB models
Research provides extra insight on reasons for decline in internal models
EU banks hedge net interest income to pass new IRRBB test
Would-be outliers look to cut sensitivity of cashflows to rate moves, but at what cost?
Banks cry foul over shock decision from Basel Committee
Asset and liability management professionals question severity of criteria in revised IRRBB tests
Fresh EU push for single securities supervisor to compete with US
But MEP expresses ‘concern’ EU nations will stall revival of capital markets union
Discord deepens over fund-linked trades in FRTB
More banks use punitive approach to capital treatment under new trading book regime, irking regulators
AI, quantum computing and tokenisation set to transform finance – Menon
But significant barriers remain preventing the technologies from unlocking their full potential