West Palm Beach (HedgeCo.net) – The Group of Thirty released a new report, ‘The Structure of Financial Supervision: Approaches and Challenges in a Global Marketplace’.

The report was issued after the meeting of G7 finance ministers and central bank governors in Washington DC. The Group of Thirty is an international body composed of central bank governors, leading economists, and private financial sector experts,

"The financial turmoil that has unfolded over the last year has tested the ability of regulatory authorities to respond effectively to financial crises. It is evident that a number of countries need to revise and reform financial regulatory structures," said Paul Volcker, Chairman of the Group of Thirty’s Board of Trustees.

Volcker underscored that improvement in regulatory approaches is essential at the national and cross-border levels. The G30 report compares and analyses the financial regulatory approaches of 17 jurisdictions, including the UK, the US and Australia, in order to illustrate the implications of the four principal models of supervisory oversight: (1) the Institutional Approach, (2) the Functional Approach, (3) the Integrated Approach, and (4) the Twin Peaks Approach.

The US structure, which falls outside of these four approaches, combines institutional and functional approaches with the added complexity of a number of state level agencies and actors.

Roger W Ferguson, President and CEO of TIAA-CREF, former Vice Chairman of the US Federal Reserve Board and the Vice Chairman of the G30 Working Group, said, "As we start to re-examine regulatory structures, the G30 report can play a role by building the fact base that regulators, politicians, and financial market participants will consider."

In March, the US Treasury released its ‘Blueprint for a Modernized Financial Regulatory Structure’, which proposes a major restructuring of financial supervision toward a regulation by objectives approach, in some ways similar to the twin peaks model to supervision and regulation. The UK has already introduced modifications in its highly integrated approach.

In preparing the report, the G30 conducted interviews with key officials in the relevant jurisdictions, as well as practitioners, regulated parties, and those who may have been involved historically in the development of the current regulatory arrangements.

Alex Akesson

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Email: alex@hedgeco.net

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Financial Times – Hedge funds charging hefty fees for sophisticated trading strategies aimed at outperforming the wider market have collectively parked $100bn in simple money market funds typically used by investors seeking safe rather than spectacular returns.

Citigroup estimates that hedge funds have now placed $600bn in cash, and that $100bn of this is held in money market funds, normally seen as some of the safest places to invest cash.

However, last week, those money funds became embroiled in the wider financial crisis to the point that the US Treasury was forced to offer a blanket guarantee on them as part of its attempts to prevent the spillover of the financial crisis into the $3,400bn sector.

The extreme measures taken by the Treasury followed mounting fears that retail investors in the sector could be starting to panic and might withdraw funds on a large scale.

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