Brussels, 02/09/2009 (Agence Europe) - The return to work of the European Parliament economic affairs committee, on Wednesday 2 September, provided the opportunity for an exchange of views on how to respond to the financial crisis with three representatives of the financial services committee of the US Congress. The discussion highlighted the desire on the part of both US and European elected representatives to ensure that reforms introduced on either side of the Atlantic to consolidate financial architecture do not differ too widely in content or in timetable. Were this not to be so, there would be a risk that the financial players targeted by the reforms might look at the situation and choose the jurisdiction more helpful to the pursuit of their activities. The draft directive on alternative investment funds (for example, hedge funds, capital investment funds), debated for the first time in committee on Wednesday, is one of the issues where regulatory arbitrage is a very present risk.
If the US and the EU do not work together to respond to the financial crisis, there will be those who play the regulatory arbitrage game, searching out the weaknesses in our regulatory frameworks, said American Democrat Luis V. Gutierrez. His Republican counterpart Scott Garrett said that there were areas where legislators should not intervene, such as hedge funds, which were not, he argued, the cause of the crisis. He felt that efforts were required to avoid regulatory arbitrage, the ideal solution being the one reached at international level. Paul E. Kanjorsky raised several points which complicate transatlantic parliamentary cooperation: the difficulty on the American side of understanding the Community decision-making process and, in contrast to the strong response of the EU, the slowness of Congress in finding any consensus leading to regulatory reform.
Faced with the “immediacy of capital flows and information for citizens”, “can we sing from the same hymn sheet?” asked Jean-Paul Gauzès (EPP, France), the newly appointed rapporteur on the draft directive on alternative investment funds. He felt that “effective and efficient regulation” for these funds had to be found. German Social Democrat MEP Udo Bullmann pointed to a major difficulty: on both sides of the Atlantic, partners are afraid of losing ground by imposing rules because they feared regulatory arbitrage. Was there a meeting of minds on transparency of derivatives markets, he wondered. Counselling against general political agreements that brought regulatory differences in their detail, Sylvie Goulard (ALDE, France) called for transatlantic cooperation to be increased so that the parliamentary dimension may be extended within the G20 summit. Sven Giegold (Greens/EFA, Germany) called for automatic exchange of tax information at international level, slamming a number of US states, such as Delaware, where banking secrecy is still tolerated. British Conservative MEP Kay Swinburne expects major differences in the US and European responses to the issue of hedge funds. We may have first-mover advantage, but we will also be at a competitive disadvantage, she warned, calling for an approach coordinated on both sides of the Atlantic. How can the situation be avoided where banks become so big they cannot be allowed to go bankrupt, wondered Hans-Peter Martin (non-attached, Austria). There were those, too, which were too small to come up on the radar, but which generated millions and took excessive risk on the markets, said Peter Skinner (S&D, UK). He expressed his astonishment that there were the same financial institutions on both sides of the Atlantic, but they were regulated differently. “Regulation does not mean stopping wealth creation, but stopping excesses,” said Rachida Dati (EPP, France). (M.B./transl.rt)