EU finance ministers agreed at the recent Group of Eight meetings to allow the hedge fund industry regulate itself through a voluntary code of conduct, the German finance minister Peer Steinbrueck said.
"We all agree that a regulatory approach is the wrong one, so we're doing the indirect approach which everybody says is right," he told journalists after chairing a meeting with his EU counterparts in Brussels.
"Further discussions with the hedge fund industry ought be pursued on what might be included in a code of conduct, how it might be implemented and monitored," he said.
Germany has had to climb down from plans for more oversight on speculative hedge funds after finding little support among its partners in both the European Union and the Group of Seven industrialized countries.
EU Internal Market Commission Charlie McCreevy, who has long opposed regulation of hedge funds, said: "I would be very supportive of the industry adopting a voluntary code of conduct."
Steinbrueck said last month in Berlin that only 10 to 15 percent of hedge funds would need to participate in such a code of conduct for it to work as long as it included the biggest players.
As the industry has grown, concerns have mounted, especially in Germany, that hedge funds could pose wider risks to the stability of the financial system if they ran into serious trouble.
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