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Euro directive could cause “systemic failure”, says BoE committee

The introduction of the Alternative Investment Fund Management directive could cause “systemic failure” of markets, according to the Bank of England’s Financial Markets Law Committee.

The Committee’s report says the directive is unworkable in its present form with too many legal uncertainties which could potentially lead to “systemic failure and widespread market disruption” if not addressed.

Among the areas of uncertainty are key concepts including the definition of an alternative investment fund, and limits on how much leverage a fund can have.

The report says: “It is essential, if the Directive is to be successful, that there is no doubt as to its scope in order to avoid uneven implementation.”

The FMLC was set up to monitor the progress of the draft AIFM directive.

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