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EU pushes SWFs to agree to IMF code

By Agencies



The European Commission called for an international accord to limit the political influence of sovereign wealth funds (SWFs) and avoid imposing rules that could stifle investment by the state-owned capital pools.


The commission, the executive arm of the 27-nation European Union, pledged yesterday to push for “transparency, predictability and accountability” from the funds that invest for governments such as Russia, Saudi Arabia and China.


The Brussels agency called for investors to agree this year to a code of conduct being drafted by the International Monetary Fund.


“Sovereign wealth fund countries must acknowledge that their growing weight in global financial markets brings responsibilities,” EU Monetary Affairs Commissioner Joaquin Almunia told a press conference in Brussels yesterday.


Voluntary disclosure of where the funds are putting their money – estimated by the commission at as much as $2.5 trillion (Dh9.18trn) or five per cent of worldwide stock-market value – would ease pressure from Germany, France and other countries to control foreign investment, just when the capital is needed for banks and state asset sales.


“The common denominator seems to be transparency,” Frank Vibert, director of the European Policy Forum, said in a telephone interview from London.

“That is the only mantra on which people can unite.”


EU leaders will debate the issue at a summit meeting next month. The commission aims to win backing for its policy to help shape the IMF code and press funds to sign up to it.

The push for the work at the IMF came from the Group of Seven nations in October last year, out of concern that the funds, while historically passive investors, could acquire sensitive technologies or influence governments.

Rising energy prices and swelling foreign-currency reserves are boosting the size of the funds, including new ones launched in China and Russia.


The commission called for the funds to disclose how much money they have, what assets they are buying and in what currencies. They should indicate their objectives and how they are shielded from the influence of their owner governments.


“The size of the assets under management raise questions,” Almunia said, adding that the funds have a “high level of opacity”.


The code helps the EU maintain a unified policy to avoid steering away investment out of confusion.

The bloc “must avoid unco-ordinated actions that could hamper the functioning of the single market and damage the EU economy”, the commission said.

“It’s far from a toothless tiger,” said Vibert, the policy research director.


Codes of conduct create benchmarks, set up periodic reviews and fit with the EU’s emphasis on “principles-based regulation” as opposed to detailed rules such as in the United States. (Bloomberg)