US Treasury Secretary Geithner blasts EU regulation

Geithner criticised the protectionist AIFM directive in a letter to Michel Barnier, Commissioner for Internal Markets and Services.

The letter reportedly stressed the need for the US and the EU to work together on financial services regulation.

If European diplomats reach agreement at a meeting today, the directive will be put to EU finance ministers when they convene next week. The proposed rules will require approval by EU lawmakers, the report said.

Geithner blasted the measures as potentially discriminating against US private equity groups and banks due to European investors being restricted to funds based within the EU.

The Institutional Limited Partners Association (ILPA) also recently warned that the proposed AIFM regulations could close investment opportunities for EU investors in non-EU countries and reduce portfolio diversification, which could result in lower returns and higher risks. The move could also impact on the development of European companies, as the regulations could effectively choke off the billions of dollars of international investment currently flowing into the region from the rest of the world, ILPA warned.  

Other areas of contention include non-EU funds being forced to comply with rules if they wish to market themselves within the EU, EU-based private equity funds being made to use locally based banks as custodians and depositaries, rules on remuneration, limits on borrowing, the disclosure of sensitive information and the regime for depositaries.

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