EUROPE/US - The European Commission has hit back at a letter by US Treasury secretary Tim Geithner warning the implementation of the hedge funds directive could cause a transatlantic rift by discriminating against US firms.
A spokesman for Michel Barnier, European Union commissioner for internal market and services, said the normal course of an internal EU discussion should be respected.
A report by the Financial Times suggested Geithner's letter - which the spokesman confirmed Barnier had received - made it clear that the EU was heading for a clash with Washington if it pushed ahead with what the US fear could be a protectionist law.
The current version of the Alternative Investment Fund Managers (AIFM) directive contains a much criticised rule, which would require non-EU alternative funds to gain an "EU passport" to be able to market their products to EU investors.
He said: "Commissioner Barnier is convinced that the US Treasury secretary would share his concerns to respect the approach in preparing the text and in particular respecting the role of the co-legislators in considering the Commission's proposal."
He added: "Barnier also recalls the proposal directly corresponds to the decisions taken by the G20 to establish regulation of funds with a leverage effect, increasing the transparency and responsibility of these key actors on the market.
"This is precisely what we are doing and we are doing it because there are clear guidelines which emerged from the G20, which Mr Geithner is very familiar with."
Sources close to the matter told GP the US hedge funds industry was very concerned about losing investment from the EU and had been making that case to the US authorities.
Barnier intends to travel to the US in the next weeks and meet the authority in order to strengthen cooperation in the areas of financial regulation.
"The idea is to establish a dialogue based on mutual trust and reciprocity," the spokesman added.
The current draft of the AIFM directive will be discussed today by the Permanent Representatives Committee - a group consisting of member state ambassadors to the EU - in an attempt to agree on a general approach to the entire draft. (Global Pensions, March 2, 2010)
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