Financial Times – The world’s hedge funds should open up their books for public grading by rating agencies and introduce a code of conduct, according to proposals by Germany’s Bundesbank forincreasing transparency in the trillion-dollar industry.
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The Bundesbank’s proposals for a system of “self-regulation plus”, disclosed to the Financial Times, are an attempt by the German central bank to kick-start a debate on how best to avoid future disasters in the rapidly-growing hedge fund industry.
Although hedge funds help improve the functioning of financial markets “we can’t just wait until a market crisis happens,” said Edgar Meister, Bundesbank board member responsible for financial supervision. “The risk is growing that a crisis is coming,” he said.
The Bundesbank is among the supervisory authorities most concerned about possible risks to global financial stability created by hedge funds, which have borrowed heavily from banks. But it has become frustrated at the lack of progress in agreeing measures that would boost transparency, knowing that national regulatory authorities would be virtually powerless if they acted alone.
