Brussels, 11/09/2007 (Agence Europe) - The political debate on the current crisis in the financial markets continued in the European Parliament economic and monetary affairs committee on Tuesday 11 September, with the appearance of Internal Market Commissioner Charlie McCreevy. Just as he had done last week at the plenary session, Mr McCreevy argued for as light as possible regulation of financial services (see EUROPE 9495). He said that the financial crisis was due in particular to a failure of regulated markets and not to a lack of regulation, which some financial players such as hedge funds use to their advantage.
Hedge Funds. Alexander Radwan (EPP-ED, Germany) criticised the Commission for not having begun a “serious dialogue” on hedge funds and financial rating agencies with the US authorities in 2004. “Yes, Europe is London, but not just London!” he said. Danish Social Democrat MEP Poul Nyrup Rasmussen was critical of the commissioner's failure to take action: he said that, for Mr McCreevy, all that had to be done was to shake the tree to make the rotten apples fall, and then carry on as before. He proposed that the Commission draw up a list of investments in which investors can have confidence. “This is a problem which affects regulated markets, banks but not others like hedge funds,” responded Mr McCreevy, who felt that the banks had to bear the responsibility for having put “bad credit” on the market, solely for the purpose of increasing their profits. During the debate, several MEPs condemned the banks' “greed”. Speaking about mechanisms that allowed uncontrolled risk transfer along the chain of investors, Mr McCreevy questioned the ability of national regulators to fully understand the complexity of the financial products in question. Prudential supervision was, he said, an issue that would certainly be discussed at the informal Ecofin Council in Oporto at the end of the week.
Transparency. Mr McCreevy wanted to respond “to the call for enhanced transparency, in a broad sense, which is so often heard in the debate” (see EUROPE 9498). “I agree that we need enhanced transparency,” he said, “but it is important to set out that the main prudential provisions in the new prudential framework on financial services, in particular Basel II, MiFID and the draft Solvency II Directive, are not implemented yet”. He added that this legal framework, even if it could not prevent the current crisis, targets “improving disclosure, monitoring risk and enhancing the role of supervisors”. (mb)