Leaders at G20 Vow to Restore International Markets, Keep a Closer Watch on Hedge Funds
Friday, April 3, 2009 : PermalinkNew York (HedgeCo.Net) – Hedge funds can expect to be kept on a tighter leash in the near future, as leaders from all over the world met at the G20 summit in London to discuss the next steps towards remedying the worst financial crisis in six decades.
Agreeing that lax regulation on all levels helped to fuel the credit crunch, the 20 leaders agreed to vamp up national regulators and to keep a watchful eye on any practices that may threaten international markets.
To some, this includes hedge funds, who have taken much of the blame for market meltdowns thanks to domino effects that stem from imploding funds and the practice of short selling which some say can create enough speculation and fear to cause plummeting stock prices.
The Financial Stability Forum, which has been around for over a decade, will be renamed the Financial Stability Board, and will have the task of overseeing international markets, banks, and to some extent, hedge funds.
The FSF has already stated that hedge funds must disclose how much leverage they are using, so that investors can better gauge the risks involved.
In an effort to quell outrageous bonuses and pay, the FSF has said that an executive’s pay must directly reflect the risks they are taking, halting any million dollar pay days for a risky wager. They also vowed to closely monitor the credit ratings agencies, whose actions contributed greatly to the economic meltdown.
The leaders also pledged to boost the war chest of the International Monetary Fund by adding $500 billion, promised to crack down on offshore tax havens and those individuals who failed to disclose information, and threw in $250 billion to help kick start trade over the next two years. An agreement was made not to introduce any new policies that would restrict trade through 2010.
Although the FSF has not drafted any rules as of yet on hedge funds or tax havens, they did agree that “systemically important hedge funds” will be regulated.
"Today the largest countries of the world have agreed on a global plan for economic recovery and reform," said British Prime Minister Gordon Brown.
President Obama agreed, saying that “the London summit was historic.”
French President Nicolas Sarkozy, who is an advocate on stricter regulations for hedge funds added, “The G20 countries have decided on a profound reform of the international financial architecture, which has not been done to such an extent since the Bretton Woods accords in 1945.”
U.S. stocks surged following the summit and the promise of a renewed economy that came with it. The Dow Jones Industrial Average shot past 8,000 for the first time since February 10. It ended the day up 2.8 percent.
Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net
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Tags: credit crunch, domino effects, economic meltdown, financial crisis, financial stability forum, fsf, g20 summit, international markets, international monetary fund, kick start, leverage, national regulators, offshore tax havens, speculation, stock prices, vamp, wager, war chest, watchful-eye
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