EUROPE - Niall Bohan, the head of the asset management unit at the European Commission (EC), today revealed the EC is reviewing short-selling and looking at possible bans on the practice, while seeking to organise stock-lending.

Bohan told delegates at the Edhec alternative investment days today the industry should brace itself for a wider global regulatory rethink, adding the EC is due to launch a consultation later this week.

He said: "Short-selling is certainly going to be an area that will be part of this global regulatory rethink."

Moreover, the market which has developed on the back of stock lending and stock borrowing will need to be codified and organised, since the weaknesses in this market have been a big source of disruption for the financial markets recently, said Bohan.

He also drew attention to a regulatory gap on a European level, and said recent developments demonstrated there is no coherent European response.

"In the present instance, the absence of the a common approach did hurt market makers and other actors active in credit support in the stock borrowing/lending markets," he said.

Bohan admitted the EC has been under much pressure from the European Parliament to conduct a review.

Indeed, Charlie McCreevy, the European Commissioner for internal market and services, announced last week he has started a wide-ranging public consultation on the supervision and risks of hedge funds, expected to be concluded later this week.

Bohan told delegates at the conference the wide-ranging review's objective is it will be undertaking at the right level and that short temr action should be avoided.

Antonio Borgess, chairman of the Hedge Fund Standards Board - which acts as custodian of the best practice standards published by the Hedge Fund Working Group - condemned the prospect of a "regulatory train", stressing the right measures are needed.

He added banning short-selling would make the market more ineffective.

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