| The EU reviewed the role of hedge funds and | | | | states. |
| private equity in the financial crisis and drew some | | | | In the current state of the new regulations a |
| lessons regarding the need for EU level regulation | | | | group of city lawyers said that the changes could |
| of these fund types. The financial crisis had | | | | lead to a systematic failure within the European |
| revealed that hedge funds could impact financial | | | | markets if they were to be carried out. They |
| stability in ways that had not previously been | | | | could also create significant legal uncertainty, which |
| expected. However, there is also widespread | | | | would lead again to a potential systemic failure |
| concern about the extent to which private equity | | | | and widespread market disruption, unless they are |
| portfolio companies are over-reliant on increasingly | | | | appropriately amended. |
| scarce bank debt, raising questions about their | | | | Due to the possible chaotic effects that these |
| financial viability. | | | | new regulations could cause to the European |
| So there are those who say private equity did | | | | economy, ministers are expected to intensify |
| not cause the economic crisis which we are now | | | | their lobbying efforts to head off what are widely |
| experiencing, but we can all agree that the crisis | | | | seen as heavy-handed rules governing the |
| most definitely is the result of excessive debt, | | | | behaviour of hedge funds, private equity firms |
| and hedge funds and private equity are | | | | and other alternative investment businesses. The |
| responsible for a very sizeable amount of recent | | | | City minister recently held talks with the Spanish |
| debt. | | | | government, which currently holds the EU |
| There are growing concerns with the EU's plan to | | | | presidency about his concern with hedge funds |
| put forward new regulations within the hedge | | | | and private equity firms, of which many are |
| fund industry as the changes could prove | | | | based in London, will just simply relocate from the |
| extensively costly to implement, even with the | | | | EU if the rules are implemented without reforms. |
| new rules being toned down by the member | | | | |