Speaking at a Financial Services Authority conference, UK Treasury minister Edward Balls said he planned to seek the views of other European countries about pooling information and working together on European international regulatory issues concerning hedge funds.
This could signal that the British government is again taking a closer look at hedge fund regulation। He said in his speech, "The first thing to stress is the consensus over the positive role that hedge funds play - providing liquidity, helping markets price assets more accurately and driving financial innovation."
But, "authorities should be vigilant regarding any of the potential risks posed by hedge funds. As the location for around 90% of the EU's hedge fund management business, the UK - and in particular the FSA - has thought hard about getting the regulatory approach to hedge funds right."
Balls said a six-monthly survey of banks' exposures to hedge funds through derivatives, secured financing and prime brokerage, could be enhanced if other regulators shared information about their own banks' exposures to the hedge fund industry. "Following discussion with the FSA, we believe that the quality of prudential supervision of hedge fund activity would be enhanced if there were greater co-operation between the key regulators," he said.
The Treasury minister said he recognized that some experts feared hedge funds were taking increasing risks to generate high returns, but he rejected a more heavy-handed approach to regulation. He also confirmed that the government is looking at issuing shariah-compliant debt, in a move to position London as a global center for Islamic finance and build bridges with the Muslim community.
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