Stricter Banking Rules Up Ahead For European Banks

October 14, 2008 9:40 a.m. EST

Brussels, Belgium (AHN) - As European central banks rush to the rescue of cash-strapped national banks, the likely result of this overstepping EU rules on state assistance to the private sector will be more regulations for banks and other financial institutions in the 27-member regional bloc.

Among the measures that EU parliamentarians are considering, contained in a report released Tuesday, are tougher laws to regulate the activities of hedge funds and private equity funds. The report also pushed for more transparency in providing reward packages for executives and the setting up of mandatory capital requirements for investment companies.

The report, though, was prepared before the Wall Street collapse which led to the U.S. Congress approval of a $700-billion rescue package for American investment firms. Of the 673 MEPs, 562 voted for it, 86 against the report and 25 abstained.

It was compiled by former Danish Prime Minister Poul Nyrup Rasmussen, current head of the Party of European Socialists.

But all issues over rescue packages going beyond EU regulations would have to take a back seat as the main concern is to stabilize the markets first. "The agenda is dominated by crisis management. Everything is suspended until we're out of the crisis," Iain Begg, an EU policies and fiscal issues expert of the London School of Economics, told Deustche Welle.