Myners warns of 'hypochondria' in EU over rules on financial risk

Published on Wednesday 10 March 2010 20:32

CITY minister Lord Myners warned yesterday against "regulatory hypochondria" from Brussels that might demonise private equity and hedge funds.

Myners, speaking to a private equity gathering in London, also indicated he was sceptical about "leverage caps" being considered by the EC to limit financial risk.

He said capping borrowings used to take over companies would fail to address the complexities of the so-called "alternative investment fund manager" (AIFM) sector.

Private equity and hedge funds were still wrongly seen in some quarters as "rapacious, asset-stripping and profit-destroying", the City minister said.

But introducing "crude" leverage caps for private equity and hedge funds "could engender unintended consequences".

His comments to the British Private Equity and Venture Capital Association event came against the backcloth of a current draft EC directive on AIFMs that aims to regulate the likes of private equity and hedge funds.

AIFMs managed 2 trillion (1.8tn) of assets in the European Union at the end of 2008.

Myners said "assiduous" horse-trading in Brussels continued on the directive, which he said in its original form was "deficient in many, many areas".

The City minister said the private equity and hedge fund sectors "should not be in denial" about the deep prejudice with which they were viewed in parts of the EU. But he likened the threat of excessive regulation from Brussels to taking too many pills for financial ailments that had not been diagnosed "just in case".

Myners said: "We must eschew regulation for its own sake in the mistaken belief you can never have enough regulation. The resulting hypochondria will serve nobody well."