Reuters – European Union proposals for the regulation of hedge funds should go further in forcing them to use more of their own capital and reflect risks on their books, German Finance Minister Peer Steinbrueck told a newspaper.

"The EU proposal contains good ideas, but it doesn’t go far enough," Steinbrueck told the taz newspaper in an interview. "I want to force the funds to use more of their own money when doing business and to keep risks on their books."

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Focus Infomation – France on Friday will press for tighter controls on hedge funds, urging other big industrialised nations to strengthen regulation of the industry and compel banks that lend them money to hold more capital. Paris wants the European Union, and eventually all leading economies, to beef up indirect regulation of hedge funds via their prime brokers, the banks which provide them with loans and other services.

Under plans to be floated by Christine Lagarde, French finance minister, banks could face higher capital requirements to reflect the riskiness of their hedge fund clients, a proposal likely to be resisted by banks that are already struggling to raise capital.

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Reuters – President Nicolas Sarkozy called at a European Union summit on Wednesday for a clamp-down on hedge funds and offshore centres as part of efforts to better regulate the world financial system.

"I would propose a simple principle, that no financial institution should escape regulation and supervision," he said according to a copy of a speech to the EU summit in Brussels.

"I am thinking, for example, of the regulation that we must apply to the rating agencies, and of the necessary supervision of hedge funds…We must also work to eliminate the grey areas that undermine our efforts at coordination, in this case the offshore centres," he said.

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