Malta Opposes clause preventing hedge funds from using local banks

Malta Independent Sunday, 28 March 2010, 00:00 Last update: about 13 years ago

Malta is opposing just one clause of the proposed EU Directive on Alternate Investment Fund Manager, our sister business newspaper, The Malta Business Weekly, reported this week.

Contrary to what has been reported by international media, that Malta is opposing a European Union crackdown on hedge funds, Malta is opposing a clause that was added by certain member states, rather than the European Commission. The clause that is being opposed prevents hedge funds set up in member states from using banks within those states.

When contacted, a spokesman for the Ministry of Finance said that Malta supports the objective of the proposed Directive on Alternate Investment Fund Manager, which is intended to overcome gaps and inconsistencies in existing regulatory frameworks at national level. The Directive also aims to provide a secure basis for the development of the internal market.

“Malta has only one outstanding issue, and that is the addition by some member states of a clause to prevent hedge funds set up in member states from using depository institutions located in other member states,” the spokesman said.

“We believe this is discriminatory against countries like Malta whose depository industry is in its infancy. It should be noted that the Commission did not propose or support the clause Malta is objecting to. The Presidency has worked hard to develop a compromise on this issue and we have supported the Presidency’s efforts.”

Last week, EU Finance Ministers met to reach an agreement on the new rules meant to oversee hedge funds but had to postpone brokering a deal due to dissenting countries. International media reported that Britain was opposing the proposed Directive, together with Cyprus and Malta.

The proposed Directive requires fund managers to register in Europe and supply more information on their trades and risk exposure to minimise the threat to the financial system. Under the proposed rules, fund managers would have to disclose their trading strategy and risk management system, explain how they value and store assets and be obliged to hold a minimum level of capital to cover potential losses.

The value of assets of funds domiciled in Malta stood at €500 million at the end of 2001 but this rose rapidly to €8.8 billion by the end of 2007 before falling to €6.6 billion at the end of 2008.