European Union lawmakers on Monday backed plans to create a systemic risk board but delayed a vote on hedge fund legislation that would have stopped EU investors from sending money to funds based in offshore tax havens.
The European Parliament's Economic and Monetary Affairs Committee voted in favor of creating a European Systemic Risk Board and three other authorities to supervise the banking, securities and insurance industries.
The vote on hedge fund rules was delayed until May 17.
“We're building something, and this is just at the beginning, the first step,” Sylvie Goulard, a French member of the European Parliament, in charge of the risk board proposal, told reporters after the vote on the supervisory authorities.
“More time is needed” to resolve differences on the hedge fund legislation before a vote is possible, said Sharon Bowles, the chairwoman of the committee overseeing the legislation.
The draft hedge fund law, known as the Alternative Investment Fund Managers Directive, would force funds based outside the EU to comply with restrictions on bonuses and leverage if they want to market themselves to investors in the 27-nation bloc. The U.K. is home to about 80% of Europe's hedge funds and 60% of its private equity firms.
The Group of 20 last year agreed to tighter fund oversight. The U.S., U.K. and business groups have challenged the proposals, saying they could hurt companies owned by private equity firms and restrict funds' use of debt. A report commissioned by the U.K.'s Financial Services Authority said the EU laws would cost companies £4.6 billion ($6.9 billion).
If adopted as they are currently drafted, the rules could force funds out of the EU, “probably to the U.S., although some to Switzerland and a few to real offshore centers,” said Simon Gleeson, a regulatory lawyer at Clifford Chance in London.