Europe Leads Overhaul of Global Financial System

The European Union is taking the lead in reforming the world’s financial system. The EU is the first power bloc to respond to calls for more regulation and is passing laws that will affect businesses around the world.

The Washington Post reported Saturday:

The Europeans are now out front, for instance, in setting strict new standards for rating agencies and risk management at firms selling mortgage-backed securities. Europe has also seized the initiative in developing new rules to monitor hedge funds while forging ahead this week with plans to create two new powerful regulatory agencies in Europe, according to analysts and regulators. …The campaign across the Atlantic has global implications, in large part because even firms based in the United States may be compelled to follow Europe’s tougher rules. For instance, under a draft proposal issued by the European Commission, the ruling body of the 27-member European Union, U.S. hedge funds may have to subject themselves to tight European oversight or be barred from doing business with European clients.

The regulation moves are worrying to financial firms. Andrew Baker, chief executive of the Alternative Investment Management Association, an organization that represents hedge funds based in the U.S., Britain and elsewhere, said, “Not to put too fine a point on it, but we are very concerned. You have a situation where other countries may be committed to the path Europe is taking.”

Analysts say that Europe’s hedge fund plan could set the standard for U.S. hedge fund borrowing limits and leverage, though the plan is yet to be ratified, and American firms could get an exemption if the EU decides America’s laws are just as tough as its own.

The Washington Post wrote,

Perhaps the most sweeping step taken by Europe so far, however, was the adoption in April of new measures on rating agencies. They would force agencies in the United States, for instance, to establish European offices if Washington does not beef up its own standards to a roughly equal level. …The agencies would need to comply no matter where they are based if they want to do business with European clients. Thus, agencies say, not complying would put them at a competitive disadvantage.

Europe is now dictating financial standards to American companies and is imposing its standards on the world. For more information, read “Financial Regulation in Prophecy!”