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November 28, 2005
EU banks' hedge fund exposure low but growing
European Union banks' exposure to hedge funds is low but likely to grow fast as the industry expands, the European Central Bank said on Friday.
Risk management is generally strict, though there is room for improvement in counterparty discipline and preparations for the risk of several hedge funds collapsing together, the ECB said in a report on the links between banks and hedge funds in the EU.
"The banks surveyed generally had stringent requirements for exposures to hedge funds, with a strong emphasis on collateralisation," the ECB said.
Some EU politicians have called for more regulation of hedge funds to boost transparency in the sector, though the ECB has said that any new rules would need the cooperation of the United States, where many hedge funds are managed.
In addition, the report concluded that existing guidelines developed since the near-collapse of U.S. hedge fund Long Term Capital Management in 1998 remained relevant.
The ECB does not supervise banks itself, but does monitor risks to financial stability in Europe.
-Reuters-
Posted by su at November 28, 2005 11:47 AM