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Reuters – European Central Bank Executive Board member Juergen Stark was quoted on Tuesday as criticizing decisions made at the G20 summit to boost the IMF’s Special Drawing Rights (SDRs).
Stark suggested in a newspaper article that the decision was potentially inflationary as it would create "helicopter money" and that it had not been properly thought out.
Last week leaders from the Group of 20 wealthy and emerging economies agreed to support a general allocation of $250 billion worth of International Monetary Fund’s SDRs alongside other measures to boost the Fund’s firepower.
New 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
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com
CNN Money – They are finally getting more serious on regulation. But success will hinge on delivery, not just detail.
The G20 summit in London will adopt a more detailed approach to overhauling the world’s financial rules in a bid to avert a rerun of the credit crunch that has floored economies.
Last November the G20 couched regulatory reform in general terms and Thursday’s summit will inject some much-needed detail in a bid to quell criticism from Germany and France.
Vancouver Sun – Prime Minister Stephen Harper won a key commitment for Canada at the G20 summit, getting world leaders to agree to extend for 12 months a pledge not to raise new trade barriers.
“The biggest single thing that could turn this recession into a very long, extended depression would be global protectionism,” Harper said in a television interview Wednesday. “In our recent budget in Canada, we actually lowered tariffs on imported machinery and equipment. It’s important that we start to see some initiatives push in the other direction, to push towards trade liberalization.”
EasyBourse.com – The U.S. and Germany are going "in the same direction" ahead of next week’s G20 summit, a spokesman for Chancellor Angela Merkel said Friday amid reports of rifts between Europe and the U.S.
There are "no points of contention here between us and the U.S. government. For both of us, and our position has been made clear for some time, regulation of financial markets is the focus of the meeting," the spokesman said after Merkel and U.S. President Barack Obama held a video conference Thursday.
"The proposals that (U.S. Treasury Secretary) Timothy Geithner has put on the table when it comes to regulation of certain players – hedge funds and others – show that we are proceeding together in the same direction," spokesman Ulrich Wilhelm told a regular press briefing.
In Obama’s first trip to Europe since being elected, the Group of 20 summit on April 2 – which brings together major industrialized and developing nations – takes place against the backdrop of the worst financial crisis in decades.
Times Online – Secretive hedge funds will eventually be subject to the same supervisory rules as banks, under a tightening of Britain’s system of regulation.
The changes, which will require banks and other lenders to build up their reserves in healthy economic times, could become the basis for international efforts to overhaul regulation at the G20 summit in London on April 2. The moves will be proposed on Wednesday in a report by Lord Turner of Ecchinswell, chairman of the Financial Services Authority, who will call for an overhaul of the tripartite links between the FSA, the Bank of England and the Treasury.
They follow repeated pledges from Gordon Brown for a crackdown on the “shadow banking system”.
New York (HedgeCo.Net) – Hedge fund regulation was the hot topic at this past weekend’s meeting of European Union leaders, when German Chancellor Angela Merkel hosted a summit in Berlin discussing ways to curtail the financial crisis.
Merkel joined leaders from The Netherlands, Spain, France, Italy, England, the Czech Republic and Luxembourg to agree on a unified EU stance prior to London’s G20 Summit in April, where all the world’s leaders will come together to discuss the financial crisis.
"We have today underscored our conviction that all financial markets, products and participants must be subject to appropriate oversight or regulation, without exception and regardless of their country of domicile,” said Merkel. “This is especially true for those private pools of capital, including hedge funds, that may present a systemic risk," she said, although the details of how hedge funds should be regulated still need to be worked out.
English Prime Minister Gordon Brown has also expressed his belief that there should be tighter regulation, despite the fact that London is Europe’s premier center for hedge funds.
"Together we will support oversight of under-regulated sectors and I also support proper disclosure and transparency of hedge funds," Brown said earlier this month.
French President Nicolas Sarkozy agreed, saying, “We want regulation of hedge funds, and we’re not going to put up any longer with the bonus reward system of traders and bankers.”
The EU leaders are scheduled to meet again this Sunday.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com
Reuters UK – Prime Minister Gordon Brown called on Thursday for greater regulation of hedge funds.
Speaking in Rome after a meeting with Italian Prime Minister Silvio Berlusconi ahead of April’s G20 summit, Brown also said leaders would focus their attention on how to tackle the financial crisis in Eastern Europe.
"Together we will support oversight of under-regulated sectors and I also support proper disclosure and transparency of hedge funds," he said. "The G20 is determined to address the financial crisis in Eastern Europe."
