France will push for the toughest possible line on hedge fund oversight as it seeks to alter the text of proposed European Union rules, French Economy Minister Christine Lagarde said on Tuesday. The European Commission proposed a draft law last week that would introduce mandatory registration of hedge fund managers and subject them to closer scrutiny when operating in the bloc under plans to step up supervision of financial markets.
Britain, the European Union's hedge fund centre, had pressed for the rules not to be overly tough and France had backed tighter regulation before the draft law's publication. Speaking to reporters on the sidelines of a meeting of EU finance ministers, Lagarde said France would fight for changes to the text that would strengthen oversight of such funds.
"The Commission's proposal is way below the demands that Europeans should have. It is regulation at its minimum," she said. "We need to have a maximalist position at the start of the negotiations," she said.
Registration should not only apply to hedge fund managers but to the funds themselves, Lagarde suggested. Passport arrangements for funds in the 27-nation bloc were a sound idea but had their shortcomings in the current format, she said. "It is necessary that the passport concerns funds that are managed not from Europe, but in Europe," she said.
Europe was not in complete agreement on hedge fund regulation and Britain in particular had raised questions, she said. Divergences between accounting standards in the United States and Europe were also an area of frustration that France hoped to discuss with EU finance ministers, she said.
France wants the International Accounting Standards board (IASB), which sets mandatory accounting rules used in the EU, to loosen its rules in response to an easing in fair-value accounting introduced by the Financial Accounting Standards Board (FASB) in the United States. "I am particularly frustrated because we already brought up this subject with our German counterparts at the informal ecofin (meeting of finance ministers) in Prague," she said. "Nothing is happening."