Central Bankers: Hedge Funds Threaten World Markets

5 de junio de 2007

<body><div id="article"><tr><td height="23" valign="middle" width="184"></td><td valign="middle" width="185"></td></tr><h1>Central Bankers: Hedge Funds Threaten World Markets</h1><p>June 5, 2007 (LPAC)--The growth of the hedge-fund industry is "too influential to ignore," Bank of Japan Governor Toshihiko Fukui told a monetary conference of international bankers in Cape Town, South Africa. "In times of stress," these funds add volatility to the markets, Bloomberg news reported. Fukui's warning was but one of many warnings issued on the risks which private equity and hedge funds pose to the international financial system at the conference today.</p><p>European Central Bank President Jean-Claude Trichet worried that "a triangle of vulnerability" exists that could trigger an upset to the financial markets. Trichet identified the three triggers as 1) low risk premiums on debt instruments, 2) the explosion of unregulated hedge funds and 3) private equity firms combined with their widespread use of complex new credit derivative instruments, according to a Reuters wire run in South Africa's <em>Engineering News</em> . "A shock at any corner of this triangle could have implications for the other two. For instance, a significant turn in the credit cycle could mean that credit protection- sellers, such as hedge funds, could become unable to make due payments to banks," Trichet told the conference. The European banker added, "Similarly if widespread problems were to emerge at hedge funds or private equity firms, which are active in the CRT (credit risk transfer) markets, this could even spark a downturn in the credit cycle." Even though Trichet said circumstance are "unpredictable," he merely asked that investors self-regulate and voluntarily monitor their transactions with hedge funds.</p></div></body>