Private equity's bid for self-regulation ‘astonishing’ says Unite
26th February 2009
Commenting on the private equity industry’s bid today to secure
self regulation, launched at the European Commission conference on
private equity and hedge funds (Brussels, February 26th), Jack
Dromey, deputy general secretary of Unite said: “As the nations of
the world wake up to the hefty penalty to pay for generations to
come because of light-touch financial regulation, the private
equity sector's bid for self-regulation is astonishing. Self
regulation is simply worlds apart from regulating in the public
interest.
"With workers losing their jobs, with growing public clamour for
transparency not secrecy, and with regulation, let alone
self-regulation, seen to fail in the global financial system, the
private equity industry remains stuck in the groove of outmoded
notions of light touch regulation and inadequate concepts of
transparency."
Unite, the UK’s largest union, is concerned that private equity
debt is likely to be the next bubble to burst and has called for
transparency from the sector about who holds the debt. The
‘originate and distribute’ nature of leveraged buyout debt means
that no one knows the ultimate owners of buyout debt, and it is a
ticking time bomb with the potential to be another ‘sub-prime’
scandal to shake our banking system. Self regulation has failed to
make transparent that risk.
In addition, the high debt levels in the private equity
leveraged buy-out model pose risks in times of economic downturn as
companies laden with high levels of debt prone to financial
distress.
Jack Dromey added: "Private equity loads its risks onto the
workforce in a ‘tails we win, head you lose’ situation. Private
equity in Britain is hiding behind Cayman Island-style self
regulation, putting secrecy before in the public interest. We need
much more than promises by the industry to do better. Private
equity must stop trying to defend the indefensible.
"It must come clean about the debt it has hidden so that our
government can plan for the impact and protect our economy and our
people from the fallout.”
ENDS
For further information, contact Pauline Doyle on 07976 832
861
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