THE European Parliament can be a frustrating place to work. When I and some of my fellow MEPs met Commission officials last week to discuss the technical details they had drafted as required by the alternative investment fund managers directive (AIFMD), it was clear the Commission had not taken on board the concerns that I and the London-based hedge fund and private equity industry had raised over its inflexible interpretation of the directive.
The Internal Market and Services Directorate, run by Michel Barnier, is now firmly in the grip of forces sceptical of the value of London’s financial services industry, a view unfortunately shared by the majority of MEPs. At the meeting, I was the only member of the European Parliament who had worked on the directive that expressed concern about the draft provisions.
While it hides behind technical and legal arguments, the Commission has gone back on previous commitments to allow EU investors to continue investing in non-EU funds; it is making it harder for private equity houses and hedge fund managers to use leverage. The Commission also wants to make banks responsible for guarding the assets of the fund subject to a level of liability that would make it very unappealing for them to hold assets, particularly in developing countries.
Officials are paying scant regard to how the hedge fund and private equity industries work and failing to engage in constructive dialogue with those who will be worst affected. And the sad truth is that there is nothing to stop them: Commission officials are accountable to no-one but themselves. Those of us who have been working in politics for the past decade or two, who have had to interact with EU institutions, have seen the widening chasm between British and continental viewpoints. David Cameron knows it is proving harder and harder to bridge, and the British business community is waking up to this fact too.
Unfortunately, member states now have less than a week to submit their written concerns over the Commission’s interpretation of AIFMD. There will be no more meetings with the Commission due to time constraints and the European Parliament has effectively washed its hands of this dossier.
The AIFMD was a shoddy piece of legislation from the word go. Hedge funds, private equity, venture capital, investment trusts and other funds that are covered by the directive but did not cause the financial crisis should never have been the focus of so much punitive legislation. If you ever doubt the Commission has picked on the wrong target, consider what might happen if today, three years on from the financial crisis, a bank was to go under. Despite all the legislation that the EU has passed, a failing bank would probably still have to be bailed out with taxpayers’ money. That is the measure of the Commission’s failure to learn the lessons from the financial crisis.
Syed Kamall is conservative MEP for London and a member of the European Parliament’s Economic and Monetary Affairs Committee.