RTRS: ECB's Trichet urges global hedge fund regulation
Hedge funds, credit rating agencies and all other important market players should be subject to regulation based on a global approach, European Central Bank President Jean-Claude Trichet said on Monday.
The worst financial crisis in over 80 years has sparked a rethink of how markets should be supervised to cut excessive risk-taking by banks.
"The current crisis is a loud and clear call for extending regulation and oversight to all systemically important institutions -- notably hedge funds and credit rating agencies -- as well as all systemically important markets -- in particular the OTC derivatives market," Trichet said.
"What is currently under discussion is the precise way in which these elements should be integrated within an overall regulatory framework," he told a conference on supervision.
"We are in the process of identifying the regulatory gaps."
Global regulatory reform tops the agenda for a summit of the Group of 20 rich and big emerging economies in London in April. Several leaders from the 27-country European Union met in Berlin at the weekend to prepare a common EU position for the summit.
The Berlin meeting agreed that no key financial player should escape regulation but stopped short of giving precise details.
The EU is adopting a draft law to introduce mandatory registration and oversight of credit rating agencies and will make proposals on hedge funds and private equity in coming weeks.
The measure on credit rating agencies has raised concerns in the United States as it would impinge on the operation of U.S. agencies such as Standard & Poor's (MHP.N) and Moody's (MCO.N).
"Let me stress that both initiatives on rating agencies and hedge funds warrant strong international coordination," Trichet said.
Trichet reiterated that the ECB stood ready to play a role in macro prudential supervision of banking risks.
Ethiopis Tafara, director of international affairs at the U.S. Securities and Exchange Commission, said any new regulatory structure must address systemic risk and provide a prudential framework for institutions deemed too big to fail.
"We need a regulatory framework that addresses misaligned incentives," Tafara said at the conference.
Another flaw in the system was that "nobody was able to access anybody else's exposure", Tafara said, adding that central clearing of off-exchange products was a major step forward.
